What’s new? The COVID-19 pandemic has hit Iran hard. The government’s response has been stumbling and painfully slow; it has also been undermined by U.S. sanctions, notwithstanding exemptions for humanitarian goods. Tehran and Washington have indulged in a futile blame game.

Why does it matter? The public health emergency is dealing heavy blows to Iran’s already battered economy, against the backdrop of elevated regional tensions but also growing calls from U.S. allies and international organisations for U.S. sanctions relief.

What should be done? The parties should pursue a humanitarian exchange that addresses their immediate respective demands: targeted sanctions relief that bolsters Iran’s ability to combat the coronavirus, in return for Tehran releasing U.S. and other foreign detainees on humanitarian grounds. A second phase of de-escalation could expand discussions to forestall further regional friction.

I. Overview

Since announcing its first COVID-19 cases in February 2020, Iran has been the Middle Eastern country most badly hit by the virus, reporting infection and fatality rates among the highest in the world. The government in Tehran, which is under great economic duress, seriously mishandled its initial response to the public health emergency. At the same time, U.S. sanctions have hindered international efforts to deliver assistance, despite exemptions for humanitarian trade. The combination of a pandemic, enormous financial pressures and U.S. sanctions could converge in a perfect storm. But they could also usher in a different dynamic, unlikely as it may be. Out of humanitarian considerations as well as strategic interests, Washington and Tehran could choose to conduct a narrow diplomatic exchange: Iran would release all dual-national and foreign detainees, who face real risks from the disease, while the U.S. would revise its sanctions policies to ensure minimal disruption to relief efforts. Both governments should pursue this second course, following up quickly with steps to ease regional tensions, especially in Iraq.

II. A Calamitous Outbreak and Ruinous Response

On 19 February, Iran confirmed its first COVID-19 fatalities in Qom. The holy city is where the contagion is believed to have started, as Chinese workers or students who recently had been in China visited the city’s seminaries.^[fn]“Coronavirus: Iran reports two suspected fatal cases at Qom hospital”, BBC, 19 February 2020. Reports of suspected cases, however, emerged earlier in the month. See “Iran reports first suspected coronavirus case”, Tehran Times, 3 February 2020; “Iran to take special measures in fight against coronavirus: Interior Min.”, Mehr News, 1 February 2020; and Rahmatollah Hafezi, “آقای رئیس‌جمهور تجدیدنظر کنید” [“Mr. President! Revise Your Stance”], Shargh, 24 March 2020.Hide Footnote Since then, Tehran has reported 50,468 total cases of infection – by some distance the highest number in the Middle East – and 3,160 fatalities, as of 2 April the sixth highest toll in the world.^[fn]“Coronavirus Resource Center”, Johns Hopkins University. Also, hundreds have died or become gravely ill from drinking industrial alcohol based on the misguided notion that it prevents infection. “In Iran, false belief a poison fights virus kills hundreds”, Associated Press, 27 March 2020.Hide Footnote Even these figures may not capture the full picture: as a World Health Organization (WHO) official cautioned on 16 March, the total number of cases could exceed the official tallies by a factor of five, due primarily to limited testing capacity.^[fn]Emma Farge, “WHO to start coronavirus testing in rebel Syria; Iran raises efforts, official says”, Reuters, 16 March 2020.Hide Footnote President Hassan Rouhani warned that “we have passed the first wave of the disease, but another wave might be awaiting us”.^[fn]“Rouhani: UNSC likely to discuss plan to lift sanctions on Iran”, Tasnim, 25 March 2020.Hide Footnote At the end of March, one Iranian was dying from COVID-19 every ten minutes, with 130 new cases detected every hour.^[fn]“Health Ministry confirms 3,111 new COVID-19 infections”, Mehr News, 31 March 2020.Hide Footnote

The government gravely mismanaged its early response to COVID-19. Officials were cavalier about the risks of the virus’s spread, peddling conspiracy theories about its origins and mobilising against it slowly.^[fn]See, for example, Maysam Behravesh, “The untold story of how Iran botched the coronavirus pandemic”, Foreign Policy, 24 March 2020; Jon Gambrell, “‘Virus at Iran’s gates’: How Tehran failed to stop outbreak”, Associated Press, 17 March 2020.Hide Footnote They dismissed suspicious cases in late January and early February as influenza and, despite the growing epidemic in China, did not sufficiently curb travel to and from that country. The government failed to do anything to boost the health care sector’s capacity.^[fn]Crisis Group interviews, Iranian medical practitioners, Tehran, March 2020.Hide Footnote Two days after Iran’s 21 February parliamentary elections – which proceeded, albeit amid historically low turnout, despite the virus – Supreme Leader Ali Khamenei lamented that foreign media had propagated “the pretext of an illness and virus” in order “to discourage people from voting”.^[fn]“Imam Khamenei’s thanks to the Iranian nation”, Khamenei.ir, 23 February 2020.
 Hide Footnote Since then, Ayatollah Khamenei has speculated that “evidence … suggests the likelihood of this being a ‘biological attack’”, and, referring to the U.S., claimed that “some people even say that some forms of the virus are particular to Iranian genes and thus produced on the basis of genetic science”.^[fn]See “The command to the armed forces to establish a medical base to fight coronavirus”, Khamenei.ir, 13 March 2020; “U.S. officials are charlatans and terrorists”, Khamenei.ir, 22 March 2020.
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Visits of pilgrims and government officials to Qom, the country’s theological power centre, spread the contagion throughout the country and among the elite – from a vice president to ministers and from Supreme Leader advisers to parliamentarians.^[fn]“Iranian Officials Infected by COVID-19”, Iran Primer, U.S. Institute of Peace, 26 March 2020.Hide Footnote Iraj Harirchi, the deputy health minister who initially downplayed the extent of the coronavirus outbreak during a press conference on 24 February, where he appeared visibly ill, became a poster child for the government’s stumbling when he tested positive for COVID-19 the following day.^[fn]Martin Chulov, “Iran’s deputy health minister: I have coronavirus”, The Guardian, 24 February 2020.
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Restrictions aimed at limiting the virus’s spread came in phases: on 23 February, the government ordered universities to close in some provinces and cancelled all cultural events; on 28 February, it called off Friday prayer gatherings, followed by the closure of all academic institutions; on 5 March, it shuttered all sports venues, followed by religious shrines on 13 March; on 19 March, it closed down non-essential businesses and shopping malls; and six days later it restricted travel between cities.^[fn]“President at the session of National Task Force for Fighting Coronavirus”, President.ir, 24 March 2020.
 Hide Footnote By 17 March, Iran had temporarily released 85,000 prisoners to prevent an outbreak in detention centres.^[fn]“Hard-hit Iran frees more prisoners amid coronavirus outbreak”, Al Jazeera, 17 March 2020.Hide Footnote Enforcement of social distancing, however, remained uneven. A notable example was the funeral of a prominent commander of Iran’s Islamic Revolutionary Guard Corps (IRGC), General Hossein Assadollahi, who died – possibly of COVID-19 – on 21 March, which was attended by thousands without taking precautionary measures.^[fn]“Iranians outraged over IRGC-organized street funeral amid coronavirus epidemic”, Radio Farda, 24 March 2020.
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In view of these various restrictions, an Iranian official complained that the international media was singling out Iran unfairly for reproach:

The track record of many advanced countries in handling the COVID-19 outbreak that were not hampered by sanctions and undue media hype is much worse than Iran’s. Any other country facing crippling sanctions amid this national health crisis would have come to its knees.^[fn]Crisis Group interview, Tehran, 25 March 2020.Hide Footnote

Yet criticism did not emanate only from abroad. Members of both the Iranian public and elite blasted the government for its haphazard response. In some cities, locals set up roadblocks to prevent travellers from entering. A hardline strategist said: “Until now, we thought our country’s problem is lack of governance. But Rouhani’s handling of the Corona crisis has proven the problem is having this ‘government’”.^[fn]Tweet by Mahdi Mohammadi, @mmohammadii61, prominent conservative strategist, 8.22pm, 26 March 2020.
 Hide Footnote A member of parliament, who tested positive himself, mocked Rouhani by tweeting, “Conspiracy theory is seemingly the most important factor in senior officials’ decision-making”, attributing the government’s refusal to shut down public offices to its misguided focus on defeating not COVID-19 but an illusory plot by “the enemy against the country’s economy”.^[fn]Tweet by Mahmoud Sadeghi, @mah_sadeghi, MP for Tehran, 4.23pm, 23 March 2020.
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As the crisis grew in scale and scope, so did tussles between political and military officials over who should run efforts to stem the outbreak and ensure implementation of mitigation policies.^[fn]Farnaz Fassihi, “Power struggle hampers Iran’s coronavirus response”, The New York Times, 17 March 2020.
 Hide Footnote Ayatollah Khamenei authorised General Mohammad Bagheri, chief of the joint armed forces, to coordinate biological defence efforts, prompting the latter to announce that the military would clear the streets in Tehran and several provinces.^[fn]“Iran security forces to empty city streets to fight coronavirus”, Reuters, 13 March 2020.Hide Footnote The Rouhani administration, apprehensive about the ramifications of shuttering an economy already reeling from sanctions, reined in the military with a Supreme National Security Council decision in favour of incremental quarantining.^[fn]Crisis Group interviews, Iranian officials, Tehran, March 2020.Hide Footnote The government’s desire to close Shiite shrines in Qom and Mashhad drew resistance from parts of the clerical establishment and eventually led to clashes between security forces and religious zealots.^[fn]Sune Engel Rasmussen and Aresu Eqbali, “Iranians defy authorities in bid to access Holy sites closed amid coronavirus”, Wall Street Journal, 17 March 2020.Hide Footnote Similar infighting led the government to halt efforts by Médecins Sans Frontières, the global medical charity, to build a field hospital in Isfahan.^[fn]While the group had authorisation from the health and interior ministries, the security establishment, prodded by hardliners, grew suspicious of some of its doctors. Since then, the government has asked all international aid agencies active in Iran to submit a full report on their activities and funding sources. Crisis Group interviews, Iranian officials and aid workers, Tehran, March 2020. Somayeh Malekian, “Iran rejects coronavirus aid amid conspiracy theories and sanctions”, ABC News, 24 March 2020; “شریعتمداری: پزشکان ظاهراً بدون مرز از کدام مرز اجازه ورود گرفته‌اند” [“Shariatmadari: From which border did the supposed Doctors without Borders get permission to enter?”], Fars News, 24 March 2020.Hide Footnote

Two interconnected calculations seemingly led the government to opt for a less cautious, piecemeal approach: reluctance to restrict travel and trade with China, Iran’s last remaining oil customer and most important trading partner, and concern that quarantines would push the economy over the cliff. “In a normal situation and a good economy, we could have imposed a lockdown”, maintained Tehran’s mayor on 15 March. “But what comes next, like providing necessary goods or compensating for losses across Iran, is not possible, so a complete lockdown cannot be done”.^[fn]Pirouz Hanachi, quoted in “Iran’s Rouhani defends virus response despite no lockdown”, Agence France Presse, 18 March 2020.
 Hide Footnote Indeed, the pandemic’s economic impact is already apparent: Iran’s financial press has reported a collapse in tourism and severe drops in revenue from goods and services ranging from fast food restaurants to barber shops.^[fn]These figures covered a 25-day period through mid-March and are based on a survey of 22 domestic businesses that had seen demand drop between 35 and 100 per cent. “Corona’s impact on 22 businesses”, Donya-e Eghtesad, 15 March 2020.Hide Footnote COVID-19’s impact could accelerate a decline in purchasing power that has already fallen off by one fifth since U.S sanctions came into effect in 2018, increase joblessness and deepen an already historic budget deficit.^[fn]Iran’s budget assumed selling one million barrels per day of oil at an average price of $50 per barrel. Djavad Salehi-Isfahani, “The Coronavirus is Iran’s Perfect Storm”, Foreign Affairs, 18 March 2020.Hide Footnote

The Rouhani administration has introduced a series of measures to soften the blow. These include cash handouts to three million hourly workers and loans for a further four million low-income households, low-interest business loans, delayed business taxes and loan repayments until May, and a request to the Supreme Leader to allocate $1 billion from the National Development Fund to the health sector. According to Rouhani, these combined outlays of $6.25 billion equal 20 per cent of the government’s revenues.^[fn]Davide Barbuscia and Parisa Hafezi, “Iran has limited scope for coronavirus economic stimulus”, Reuters, 25 March 2020; “President at Govt Economic Board for looking into coronavirus outbreak impacts”, President.ir, 26 March 2020; “President at the session of National Task Force for Fighting Coronavirus”, President.ir, 28 March 2020. The dollar equivalent is based on market rates, while Rouhani has cited a figure of “about $10 billion”.
 Hide Footnote Yet the outbreak’s costs are likely to mount substantially. An Iranian official on 4 March estimated a decline of 18 per cent in foreign trade.^[fn]“Iran’s trade volume down 18 per cent over coronavirus outbreak”, Mehr News, 5 March 2020.Hide Footnote Since then, however, prospects have worsened: Iraq, Iran’s biggest regional export destination, announced a provisional closure of its land borders, while total Chinese trade with Iran in January and February dropped nearly 27 per cent compared with November-December, with exports to Iran down nearly 22 per cent and imports from Iran down over 34 per cent during the same time period due to the COVID-19 outbreak in China.^[fn]Khalid Al Ansary, “Iraq to suspend border trade with Iran, Kuwait from March 8-15”, Bloomberg, 6 March 2020; General Administration of Customs, People’s Republic of China, 23 March 2020.Hide Footnote

Furthermore, while Iranian crude exports have fallen precipitously since the U.S. revoked all oil waivers in 2019, what barrels it manages to sell will yield shrinking dividends as crude-oil prices nosedive.^[fn]Iran’s oil exports in January and February 2020 were estimated at around 250,000 barrels per day, down from around 2.5 million barrels per day prior to the reimposition of U.S. sanctions. See Dalga Khatinoglu, “Iran crude oil exports drop to less than 250,000 bpd in February”, Radio Farda, 2 March 2020.
 Hide Footnote In other words, by curtailing regional trade and reducing Iran’s remaining oil sales, the coronavirus may succeed in decimating those remaining revenue sources that U.S. sanctions have not managed to kill off. The economy shrank an estimated 9.5 per cent in 2019, mostly due to the impact of U.S. sanctions.^[fn]“World Economic Outlook”, International Monetary Fund, October 2019.Hide Footnote While the International Monetary Fund (IMF) and World Bank had projected that growth would recover to zero or even turn marginally positive, the COVID-19 crisis is more likely to cause another major economic contraction.^[fn]Bijan Khajehpour, “Will Iran’s economy collapse under the coronavirus crisis?”, Al-Monitor, 19 March 2020. The IMF projected 0.0 per cent GDP growth in 2020. “World Economic Outlook”, op. cit. The World Bank estimated 0.1 per cent growth. “Iran’s Economic Update – October 2019”, World Bank, 9 October 2019.Hide Footnote

III. A Futile Blame Game

Amid Iran’s acute humanitarian distress, Tehran and Washington have engaged in a rancorous bout of finger-pointing. Iranian officials contend that U.S. sanctions have hampered their efforts to stem the outbreak, namely by limiting access to drugs, medical equipment and raw materials for domestic production of these goods, and by causing systemic harm, which has put the country in a uniquely disadvantaged position compared to others grappling with COVID-19.^[fn][1] See, for example, Javad Zarif’s 12 March 2020 letter to UN Secretary-General António Guterres. Tweet by Javad Zarif, @JZarif, Iranian foreign minister, 2:37pm, 13 March 2020. President Rouhani, in turn, published an open letter to “the people of America”, asking whether amid this public health crisis “the American people accept that these malicious pressures are brought to bear on the Iranian people in their name, as a result of their vote, and by the means of their taxes”. See “President in a message addressing the American people”, President.ir, 20 March 2020.Hide Footnote Washington has countered these charges by highlighting “broad exceptions and authorisations to its sanctions for the commercial export of food, medicine, medical devices and agricultural products to Iran”, and instead pinned the blame on internal mismanagement, corruption and considerable spending by Tehran to bankroll its foreign partners and proxies.^[fn]Secretary of State Michael Pompeo charged: “the Iranian leadership is trying to avoid responsibility for their grossly incompetent and deadly governance. … the Wuhan virus is a killer and the Iranian regime is an accomplice”. “Secretary Michael R. Pompeo’s Remarks to the Press”, U.S. State Department, 17 March 2020. Arshad Mohammed, Daphne Psaledakis and Parisa Hafezi, “U.S. to Iran: Coronavirus won’t save you from sanctions”, Reuters, 20 March 2020.Hide Footnote

One cannot deny the Iranian government’s responsibility for worsening this crisis, mishandling the economy and wasting resources, but many cast doubt on the effectiveness of humanitarian exemptions to U.S. sanctions even before the COVID-19 outbreak.^[fn]Amirhossein Takian, Azam Raoofi and Sara Kazempour-Ardebili, “COVID-19 Battle during the Toughest Sanctions against Iran”, The Lancet, vol. 395 (March 2020), pp. 1035-1036.
 Hide Footnote In 2019, Human Rights Watch said “sanctions have largely deterred international banks and firms from participating in commercial or financial transactions, including for exempted humanitarian transactions, due to the fear of triggering U.S. secondary sanctions”.^[fn]“‘Maximum Pressure’: U.S. Economic Sanctions Harm Iranians’ Right to Health”, Human Rights Watch, 25 October 2019.Hide Footnote This finding echoes those of international aid agencies operating in Iran. In January, the Norwegian Refugee Council reported that “for large parts of 2018-19 we could not find a single international bank able to transmit Western donor money to aid Afghan refugee communities across Iran and natural disaster victims in most affected provinces”.^[fn]“U.S.-Iran tension threatens lifeline to millions across the Middle East”, Norwegian Refugee Council, 8 January 2020.Hide Footnote More recently, Relief International’s Iran director confirmed that “one of the problems for international aid has been to clarify the legal issues related to sanctions … this slowed down the health response in the first weeks of the [COVID-19] outbreak”.^[fn]“Update: Iran’s fight against coronavirus pandemic”, Relief International, 11 March 2020.Hide Footnote

The challenges of navigating sanctions are also evident in a Swiss government initiative to develop, in cooperation with U.S. authorities, a humanitarian trade mechanism.^[fn]In announcing the SHTA’s launch, the Swiss government noted that, following the reimposition of U.S. sanctions: “it has become increasingly difficult for Swiss exporters to supply humanitarian goods to Iran, although such shipments are in principle not subject to U.S. sanctions … hardly any financial institutions were willing to make payments in connection with Iran. The few remaining payment channels were expensive, complex and not very reliable”. See “Payment mechanism for humanitarian supplies to Iran in effect”, Swiss Federal Council, 27 February 2020.
 Hide Footnote After lengthy deliberations between Washington and Bern, a pharmaceutical firm in January carried out a pilot transaction for the Swiss Humanitarian Trade Arrangement (SHTA), dispatching €2.3 million in medicine to Iran through the Banque de Commerce et de Placements.^[fn]“Payment mechanism for humanitarian supplies to Iran to take effect”, Swiss Federal Council, 30 January 2020. The U.S. noted that the arrangement “is subject to strict due diligence measures to avoid misuse by the Iranian regime”. “United States Announces Successful Initial Transactions Through Humanitarian Channel for Iran”, U.S. Treasury Department, 30 January 2020.Hide Footnote Washington announced that the SHTA was “fully operational” on 27 February, and U.S. officials have since referred to the channel as a means of dispatching assistance amid the coronavirus outbreak.^[fn]On 19 March, for example, U.S. Special Representative for Iran Brian Hook affirmed that “we encourage people to use this channel that we have set up through the Swiss to help the Iranian people”. Quoted in “Briefing on Updates American Citizens Wrongfully Held Abroad [sic]”, U.S. State Department, 19 March 2020.Hide Footnote But the SHTA is no silver bullet: as of 19 March, there has been only one completed transaction. Swiss authorities say the delays are due primarily to the lack of financing available to Iran, as Iranian assets abroad remain frozen in escrow accounts because of U.S. sanctions on Iran’s central bank and their chilling effect even though humanitarian trade is nominally exempt from sanctions.^[fn]Crisis Group interviews, Tehran, March 2020. “Briefing on Updates American Citizens Wrongfully Held Abroad”, op. cit. A Swiss official on 7 March revealed that “there are 50 companies that are interested [in the SHTA] at the moment, and we think there will be more”. Michael Shields, “Dozens of Swiss companies keen on export channel to Iran”, Reuters, 7 March 2020.Hide Footnote

Other international actors are thus looking for different ways of getting aid to Iran. UK officials have reportedly urged Washington to loosen some of its sanctions, assessing that the SHTA “involves so many [due diligence] conditions as to be ineffective”.^[fn]Patrick Wintour, “UK presses U.S. to ease Iran sanctions to help coronavirus”, The Guardian, 18 March 2020.Hide Footnote The UN Secretary-General and UN High Commissioner for Human Rights are among those who joined a growing chorus calling for alleviating sanctions – not just on Iran, but more broadly.^[fn]UN Secretary-General Guterres on 23 March wrote Group of Twenty (G-20) leaders to say he was “encouraging the waiving of sanctions imposed on countries to ensure access to food, essential health supplies and COVID-19 medical support. This is the time for solidarity not exclusion”. “Note to Correspondents: Letter from the Secretary-General to G-20 Members”, UN, 23 March 2020. The following day, UN High Commissioner for Human Rights Michelle Bachelet said “sectoral sanctions should be eased or suspended … humanitarian exemptions to sanctions measures should be given broad and practical effect, with prompt, flexible authorisation for essential medical equipment and supplies”. The statement additionally took note of the fact that “in Iran … human rights groups have repeatedly emphasised the impact of sectoral sanctions on access to essential medicines and medical equipment”, and warned of the risk that Iran’s outbreak “is also spreading to neighbouring countries which will strain health services in countries such as Afghanistan and Pakistan”. “Bachelet calls for easing of sanctions to enable medical systems to fight COVID-19 and limit global contagion”, Office of the High Commissioner for Human Rights, 24 March 2020. Pakistan’s prime minister, Imran Khan, on 22 March directly called on the White House “to lift the sanctions against Iran till the COVID-19 pandemic is over”. Tweet by Imran Khan, @ImranKhanPTI, Pakistani prime minister, 8:06am, 22 March 2020. Iraq’s prime minister-designate, Adnan al-Zurfi, similarly contended that “the international community must help them [ie, the Iranians] by lifting or easing the sanctions and providing medical treatments, as this has health and security repercussions on Iraq”. Quoted in Tuqa Khalid, “Coronavirus: Iraqi PM-designate urges lifting of sanctions on Iran to protect Iraq”, Al Arabiya, 30 March 2020.Hide Footnote

Some aid has trickled in. The Instrument for Supporting Trade Exchanges (INSTEX), a special-purpose financial vehicle that France, Germany and the UK unveiled in January 2019 to preserve humanitarian trade with Iran in the face of U.S. sanctions, finally conducted its first transaction related to export of medical goods from Europe to Iran on 31 March.^[fn]Laurence Norman, “EU ramps up trade system with Iran despite U.S. threats”, Wall Street Journal, 31 March 2020. The mechanism was ready to conduct this transaction as early as December 2019, but Iran was reluctant to let it through, lest it strengthen, despite its limited value, Europe’s hand in the dispute on compliance with commitments under the accord. Crisis Group interviews, Iranian and European officials, Munich, February 2020.Hide Footnote Aid has also been arriving from international agencies, non-governmental organisations and foreign governments, but it is nowhere near what Iran has indicated it needs to effectively fight the virus.^[fn]Among the governments that have already sent, or announced plans to dispatch, assistance to Iran are France, the UK and Germany, China, Japan, Turkey, Kuwait, Qatar and the United Arab Emirates. The EU on 23 March revealed that “there is some €20 million in the pipeline … that we expect to be delivered over the next weeks”. Josep Borrell, the EU high representative for foreign affairs and security policy, quoted in “EU to provide 20 mln euros in humanitarian aid to Iran”, Reuters, 23 March 2020. Foreign Minister Zarif on 12 March published a list of 30 items urgently needed by Iran’s health ministry, including ventilators, protective masks and gloves, as well as other medical equipment and drugs. Tweet by Javad Zarif, @JZarif, Iranian foreign minister, 7:54am, 12 March 2020.Hide Footnote On 28 February, the Trump administration announced that it had offered to assist Iran with its COVID-19 response via the Swiss government, which represents U.S. interests in Iran, without making the details public. Tehran rejected the offer out of hand.^[fn]“United States Offers Assistance to the Iranian People”, U.S. State Department, 28 February 2020. President Rouhani on 4 March maintained that the U.S. had donned “a mask of compassion in pretending to help the Iranian people; you had better lift the drug sanctions at least if you’re really sincere”. “President at cabinet session”, President.ir, 4 March 2020. There is precedent for U.S.-Iran humanitarian cooperation in times of strained relations. In response to the December 2003 Bam earthquake, the George W. Bush administration provided more than $10 million in assistance and facilitated humanitarian aid operations through Treasury Department licences. “U.S. assistance to Iran following Bam earthquake”, U.S. State Department, 31 March 2006. Too, the Obama administration in August 2012 responded to a devastating earthquake in north-western Iran by granting a 45-day license allowing non-governmental organisations to send “up to $300,000 … to Iran to be used for humanitarian relief and reconstruction activities”. “Treasury Issues General License to Aid Iranian Earthquake Victims”, U.S. Treasury Department, 21 August 2012.Hide Footnote As an Iranian official put it, “We don’t need handouts from the U.S. We need them to unshackle our hands by lifting the sanctions”.^[fn]Crisis Group interview, Tehran, 26 March 2020.Hide Footnote

IV. Policy Contagion

The COVID-19 crisis comes at a particularly difficult political moment for the Iranian government. In November 2019, its decision to abruptly raise fuel prices triggered widespread protests, the latest and most significant bout of unrest due to economic discontent and political stagnation. Security forces brutally suppressed the uprising, killing hundreds and imprisoning thousands.^[fn]Crisis Group Statement, “Learning the Right Lessons from Protests in Iran”, 4 December 2019; “At least 23 children killed by security forces in November protests – new evidence”, Amnesty International, 4 March 2020.Hide Footnote In January, Iran downed a Ukrainian civilian airliner, purportedly having confused it for an incoming U.S. missile at a time of heightened bilateral tensions following the U.S. killing of General Qassem Soleimani, head of the IRGC’s elite Qods Force, in Baghdad and Iranian retaliatory strikes against U.S. military installations in Iraq.^[fn]See Crisis Group Middle East Report N°210, The Iran Nuclear Deal at Four: A Requiem?, 16 January 2020.Hide Footnote

The longer the immediate public health emergency festers and the larger the accumulated financial cost, the more the sense of government ineptitude and mismanagement may increase as well.^[fn]A study by one of Iran’s top universities has projected that the country’s COVID-19 outbreak could grow in severity for a further two months, with a worst-case scenario of up to 3.5 million dead. Under optimal conditions of internal mitigation and external assistance, the Sharif University of Technology scholars estimated a minimum of 12,000 deaths. Shabnam von Hein, “Iran faces catastrophic death toll from coronavirus”, Deutsche Welle, 17 March 2020.Hide Footnote Too, Iran’s hardliners have hammered away at the Rouhani administration’s crisis management and appeals for international assistance as “begging diplomacy”, insisting that Iran’s domestic capacities are sufficient to weather the storm.^[fn]See, for example, Kamal Ahmadi, “گشایش اقتصادی گروگان نگاه به خارج ” [“Economic opening is hostage to external hopes”], Kayhan, 15 March 2020.Hide Footnote Rouhani has in turn appealed for unity in responding to the crisis, insisting that “now is not the time for partisanship and politicking”.^[fn]“President in cabinet session”, President.ir, 29 March 2020.Hide Footnote

As the government’s stream of own-goals erodes public trust, the IRGC is increasingly portraying itself as the only competent force in the country. A senior Iranian official said: “the fact that the Rouhani administration finally enforced the same social distancing and travel restrictions for which the military had been advocating after two weeks’ delay made the former look as indecisive as the latter did prescient”.^[fn]Crisis Group interview, Tehran, 25 March 2020.Hide Footnote Even Foreign Minister Javad Zarif said the crisis had underscored “the necessity for renewal of the method of governance”.^[fn]“U.S. trying to turn Iran into isolated island in ocean of miseries”, IFP News, 18 March 2020.Hide Footnote Having won a landslide in the parliamentary elections and with the 2021 presidential election looming, hardliners – many of whom have a military background – are seizing the opportunity to promise more effective leadership.^[fn]The runoff elections for eleven remaining seats, which were scheduled for 17 April, have been postponed to 11 September because of the outbreak. The former mayor of Tehran and a front runner for speaker of the next parliament, Mohammad Bagher Ghalibaf, tweeted: “I’m sorry that the advice of the concerned was overlooked, and now I have to say this publicly: Corona won’t be contained with optimism and delays … we only have one path forward: extreme quarantine and national-level temporary restrictions”. Tweet by Mohammad Bagher Ghalibaf, @mb_ghalibaf, incoming parliamentarian, 1:01pm, 26 March 2020.Hide Footnote Should they convince the public of this notion, the militarisation of Iranian politics could accelerate. In the meantime, while the COVID-19 outbreak has reduced the odds of a renewed uprising for now, it is bound to deepen Iran’s economic troubles and magnify popular demands for change that could ultimately push demonstrators back into the streets.^[fn]There is historical precedent: the government’s failure to manage a cholera outbreak in 1904 and the economic devastation that the illness left behind led to widespread protests, ushering in the 1906 Constitutional Revolution. See Amir Afkhami, “Pandemics Ravaged Iran Long Before the Coronavirus”, Foreign Affairs, 2 March 2020.Hide Footnote

The politics of the outbreak are churning against the backdrop of wider U.S.-Iran animosity that has grown steadily since Tehran decided in May 2019 to counter U.S. “maximum pressure” with “maximum resistance”. Less than three months have passed since tensions nearly boiled over into conflict after the U.S. killed Soleimani.^[fn]Crisis Group Report, The Iran Nuclear Deal at Four, op. cit.Hide Footnote Since those exchanges, tensions have continued to simmer, as underscored in March by a string of rocket attacks in Iraq. One of these attacks, by an Iran-backed paramilitary group against Camp Taji on 11 March, killed three members of the U.S.-led counter-ISIS coalition and injured a further twelve; another barrage upon the same facility three days later injured three U.S. troops.^[fn]“Coalition casualties in Iraq”, Operation Inherent Resolve, 12 March 2020; Jim Garamone, “3 U.S. service members wounded in Iraq attack”, U.S. Department of Defense, 15 March 2020.Hide Footnote Some U.S. officials, including Secretary of State Mike Pompeo and National Security Advisor Robert O’Brien, reportedly argued in favour of retaliating directly against Iranian military assets in the Gulf or on the country’s own soil, though the U.S. military, conscious of the military risks and political costs of such an action to U.S.-Iraqi ties, advocated for a more limited response and eventually targeted Iraqi paramilitary facilities in Iraq.^[fn]Mark Mazzetti, Helene Cooper, Julian Barnes, Alissa Rubin and Eric Schmitt, “As Iran reels, Trump aides clash over escalating military showdown”, The New York Times, 21 March 2020; and Mark Mazzetti and Eric Schmitt, “Pentagon order to plan for escalation in Iraq meets warning from top commander”, The New York Times, 27 March 2020.Hide Footnote

Little suggests that the COVID-19 crisis is prompting either Washington or Tehran to change their respective positions. Not only has the U.S. failed to offer Iran sanctions relief amid the pandemic, it has also levied new sanctions, unveiling in the course of a single week restrictions on five Iranian nuclear scientists and sanctions against seventeen entities and individuals linked to Iran’s petrochemical trade.^[fn]“Constraining Iranian Nuclear Scientists”, U.S. State Department, 18 March 2020; “Sanctions on Entities Trading or Transporting Iranian Petrochemicals”, U.S. State Department, 18 March 2020; “Treasury Targets Companies Facilitating Iran’s Petrochemical Sales”, U.S. Treasury Department, 19 March 2020.Hide Footnote It subsequently designated twenty more entities and individuals allegedly involved in, inter alia, “transferring lethal aid” from the IRGC to Iraqi paramilitary forces.^[fn]“Treasury Designated Vast Network of IRGC-QF Officials and Front Companies in Iraq, Iran”, U.S. Treasury Department, 26 March 2020.Hide Footnote

Some in the Trump administration apparently hope that the compounded effects of COVID-19 and U.S. sanctions will bring Tehran to the table.^[fn]A U.S. diplomat assessed that the coming months could offer an opportunity to hit the pause button on further escalation: “There may be a window in the spring and summer for a negotiated ceasefire that puts us into a holding pattern until the November [U.S. presidential] elections. A combination of pressures on the Iranian leadership … would leave the regime needing relief for limited stability”. Crisis Group interview, Washington, March 2020.Hide Footnote Yet there is reason to believe that Iran will not be interested in negotiations from a position of weakness and at a time when it deeply distrusts the U.S. Speaking before the pandemic outbreak, a senior Iranian official assessed:

Trump just wants a photo op, not a mutually beneficial deal. He has been misled by Pompeo and others to believe that we will fall by this fall. So it’s useless to even contemplate negotiating with this administration.^[fn]Crisis Group interview, Munich, February 2020.Hide Footnote

Washington’s response to the COVID-19 outbreak, which in Tehran is seen as increasing the suffering of the Iranian people, likely has further dimmed prospects for negotiations over the kind of deal for which the U.S. has called. As an Iranian official put it:

The corona crisis was the last straw, as it showed the immoral cruelty of this [U.S.] administration. Who would think of a country in the midst of public health crisis as ripe for bombing [referring to Pompeo]? Team Trump is worse than Yazid [the second caliph of the Umayyad dynasty, who killed the prophet’s grandson, Imam Hussein, in 680, and is one of the most hated figures in the Shia world]. They have raised the political costs of negotiations to the extent it has become prohibitive for any Iranian politician to engage them.^[fn]Crisis Group interview, Tehran, March 2020.Hide Footnote

If anything, Iran may now see some benefit in raising tensions with the U.S. – and lesser cost, as officials could assess that the Trump administration will not want to add an external crisis to its domestic one.^[fn]Courtney Kube and Carol Lee, “Trump nixed aggressive response to attacks by Iranian proxies because of coronavirus, officials say”, NBC News, 19 March 2020.Hide Footnote U.S. defence officials have warned that the likelihood of further attacks by Iran or its allies remains significant, and perhaps even more acute as a result of the pandemic.^[fn]On 13 March, the commander of U.S. Central Command, General Kenneth McKenzie, assessed that the Iranians “are actively seeking ways to achieve destabilization that would allow them to escape the strictures of the maximum pressure campaign … the illusion of normality is just that: It’s the illusion of normality”. McKenzie further posited that “the net effect of … COVID-19 is that it has increased pressure on Iran’s strategic decision-makers”. Quoted in “Marine Corps General Kenneth F. McKenzie Jr., Commander, U.S. Central Command Holds a Press Briefing on Defensive Strikes Against Iran”, U.S. Department of Defense, 13 March 2020.Hide Footnote Tehran may at one time have hoped that, with the initial shock of U.S. sanctions behind it, its economy would stabilise and it therefore could afford to wait out the Trump administration – at least until the November 2020 U.S. presidential election. But those hopes likely are now dashed by the economic devastation wrought by COVID-19.

As a result, it is possible that Tehran will decide to try raising the cost of the U.S. “maximum pressure” strategy by resorting to greater provocation in the region through its allies. Rouhani himself suggested, in the midst of the pandemic, that Iran’s response to the Soleimani killing remains incomplete, remarking on 18 March that “we have not left – and will not leave – his assassination unanswered”.^[fn]“President at cabinet session”, President.ir, March 2020.Hide Footnote President Donald Trump has likewise cited “information and belief” to warn of Iranian or Iran-linked strikes against U.S. interests in Iraq, threatening Tehran with “a very heavy price” if one occurs.^[fn]Tweet by Donald J. Trump, @realDonaldTrump, U.S. president, 1:05pm, 1 April 2020.Hide Footnote

A regional escalation could appeal to the Iranian leadership for several reasons: it could divert attention from the mounting economic troubles and popular dissatisfaction at home; achieve the long-sought goal of pushing the U.S. out of Iraq with perceived lower risks of backlash, given President Trump’s preoccupation with containing COVID-19’s spread and its economic fallout in the U.S.; and in the opinion of some in Tehran, bring down Trump’s presidency with a shocking attack closer to the U.S. elections.^[fn]An Iranian national security official said: “We brought down Jimmy Carter’s presidency [with the hostage crisis] and can do it again. Trump is not immune to an October surprise”. Crisis Group interview, Tehran, February 2020.Hide Footnote These calculations might lead Iran to take bigger risks.

Escalation on the nuclear front is another option, if probably less likely. Tehran appears loath to push too far, too fast, lest it lose the political support of Russia, China and the Europeans and prompt them to restore UN sanctions, which would recategorise Iran as a threat to international peace and security under the UN Charter’s Chapter XII and prevent the lifting of the UN embargo on Iran’s access to the conventional arms market due to expire in October.^[fn]Crisis Group interviews, Iranian officials, Munich and Tehran, February-March 2020. Iran has declared that UN sanctions snapback would constitute a red line, prompting it to withdraw from not just the JCPOA but also the nuclear Non-Proliferation Treaty (NPT). “Iran to quit NPT if its nuclear programme referred to UN: Zarif”, Al Jazeera, 20 January 2020.Hide Footnote As such, while Tehran remains in breach of its commitments under the 2015 Joint Comprehensive Plan of Action (JCPOA), it has neither significantly ramped up its nuclear activities nor tampered with the International Atomic Energy Agency’s (IAEA) inspections.

Before the pandemic, the leadership’s assessment, according to a senior Iranian official, was that Iran and the deal’s remaining parties were in a de facto less-for-less arrangement pursuant to which Iran did not benefit from the accord’s economic dividends and in turn did not observe restrictions on its uranium enrichment program.^[fn]“Verification and Monitoring in the Islamic Republic of Iran in Light of United Nations Security Council Resolution 2231 (2015)”, GOV/INF/2020/5, IAEA, 3 March 2020.Hide Footnote “There are no more limits to shed, and at this stage we don’t need more enrichment. So the nuclear issue is on the back burner for now”, he said.^[fn]Crisis Group interview, Munich, February 2020.Hide Footnote This attitude clearly concerns European officials, cognisant that Iran is gaining irreversible knowledge through research and development and increasing its stockpile of low-enriched uranium – now sufficient for a single nuclear weapon if enriched further. But after initiating the deal’s dispute resolution mechanism, they have done little to accelerate the process and may well have decided to drag it out until after the U.S. elections, assuming Iran does not significantly ratchet up its nuclear activities or ratchet down the IAEA’s access.^[fn]Crisis Group interviews, European and UK officials, Washington, January-March 2020.Hide Footnote

While the COVID-19 outbreak has had no impact on the IAEA’s access to Iran so far, there is a ticking bomb that risks sabotaging Iran’s relations with the agency.^[fn]A senior IAEA official said: “the pandemic has had no impact on IAEA’s inspections in Iran or anywhere in the world. … Of course, everything now is much more complicated because of travel limitations, but we were able to maintain our inspection plan”. Crisis Group email correspondence, March 2020.Hide Footnote Iran has refused to provide access to two sites that the IAEA deems suspicious, or to answer questions related to undeclared raw uranium in a third. The IAEA’s director general, Rafael Grossi, has warned that “we will be walking toward a crisis” if Iran does not cooperate in clarifying “a number of questions related to possible undeclared nuclear material and nuclear-related activities”.^[fn]Grossi quoted in John Irish, “U.N.’s nuclear chief to Iran: Cooperate or face new crisis”, Reuters, 3 March 2020. See also “IAEA Director General’s Introductory Statement to the Board of Governors”, IAEA, 9 March 2020.Hide Footnote Iranian officials contend that the allegations are false and based on the “nuclear archive” that Israel says it spirited out of Iran in 2018; and they say they fear that responding to the agency’s demands would become a slippery slope of unending harassment aimed at gathering more information about Tehran’s pre-2003 nuclear activities.^[fn]Crisis Group interviews, Iranian officials, Vienna, November 2019. To learn more about the “nuclear archive”, consisting of more than 100,000 physical and digital files relating to Iran’s nuclear program removed by Israeli intelligence operatives from Tehran in 2018, see “The Iran Nuclear Archive: Impressions and Implications”, Harvard University Belfer Center, April 2019.Hide Footnote But Tehran’s refusal to cooperate with the IAEA could once again turn into a major non-proliferation crisis, and thereby deal the JCPOA a death blow.

V. Viral Diplomacy?

The COVID-19 crisis is a moment of reckoning for U.S.-Iran relations. Holding the current course has clear and sobering implications: for Iran, a growing humanitarian toll due to unmet medical needs, government dithering and mismanagement, and, in the longer term, a worsening economic crisis; and, for the U.S., continued failure of a strategy aimed at forcing Iran to the negotiating table or at changing its regime coupled with an increasingly combustible regional environment. Tehran’s approach will not compel the Trump administration to revise its strategy; Washington’s approach will not lead Tehran to submit to its demands. In this sense, both could be engaged in magical thinking. Instead, they should seize the moment and engage in a form of COVID-19-inspired diplomacy.

Iran, which has furloughed one dual UK/Iranian national to her parents’ residence and a U.S. citizen to a private hospital among tens of thousands of furloughed Iranian prisoners, should take a further step and furlough remaining dual and foreign nationals in its custody on humanitarian grounds.^[fn]Nazanin Zaghari-Ratcliffe, a dual UK-Iranian citizen detained by Iran in 2016, was released on 17 March for two weeks, a period extended by a further two weeks on 28 March. “Nazanin Zaghari-Ratcliffe ‘being considered for clemency’ in Iran as leave from prison extended”, Sky News, 28 March 2020. Michael White, a U.S. citizen, was furloughed on 19 March, prompting Secretary of State Pompeo to affirm a U.S. commitment to see White and other U.S. citizens released. “Medical Furlough of U.S. Citizen Michael White”, U.S. State Department, 19 March 2020. Iran has made similar requests of the U.S., with Foreign Minister Zarif on 27 March maintaining that the “U.S. has taken several Iranian scientists hostage” and calling for their release. See tweet by Javad Zarif, @JZarif, Iranian foreign minister, 7:44am, 27 March 2020.Hide Footnote Given the risk that they could become infected with the disease, it would be far better if Tehran were to release U.S. citizens and allow them to depart Iran; while Iran ought to let them go unconditionally, realistically it may insist on an exchange, as it did with France whose detained citizen was swapped for an Iranian arrested in France and whom the U.S. wanted extradited on sanctions violations charges.^[fn]“Iran frees French researcher in apparent prisoner swap”, Agence France Presse, 21 March 2020. In reaction to the exchange, the U.S. said it “deeply regrets France’s unilateral decision to release Iranian national Jalal Rohollahnejad from its custody” and called it “regrettable … that France failed to uphold its treaty obligations”. “France’s Unilateral Release of Iranian National Jalal Rohollahnejad”, U.S. State Department, 22 March 2020.Hide Footnote

For its part, Washington could take steps to help Tehran contain the humanitarian crisis caused by COVID-19 by expanding and clarifying the definition of humanitarian goods covered under existing Treasury Department general licences and announce that no transaction related to humanitarian trade with Iran will be penalised for the next 90 to 120 days.^[fn]For more details on how the U.S. could adjust its sanctions policy without lifting the restrictions to aid the Iranian people amid the pandemic, see Esfandyar Batmanghelidj, “How to help Iran fight the virus”, Bloomberg, 24 March 2020; Katherine Bauer and Dana Stroul, “Sanctions relief isn’t necessary to assist Iran’s coronavirus response”, The Hill, 31 March 2020.Hide Footnote The Treasury Department should accelerate the rate and increase the number of licences it issues to companies interested in exporting humanitarian goods not covered by general licences to Iran.^[fn]According to the Office for Foreign Assets Control, in charge of enforcing U.S. sanctions, from July to September 2018, fewer companies applied for authorisation to export goods to Iran and the rate of approval dropped from more than 50 per cent in 2017 to 10 per cent in the first quarter of 2019. “Second Quarter Report”, Office of Foreign Assets Control, U.S. Treasury Department, March 2019. While in February the Treasury Department issued a new general licence allowing Iran’s central bank to conduct humanitarian trade-related transactions, the licence does not cover advanced medical equipment. “General License No. 8 - Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran”, U.S. Treasury Department, 27 February 2020.Hide Footnote The U.S. could also provide assistance to international organisations, like WHO or the International Committee of the Red Cross, for on-shipment to Iran.

The Trump administration and opponents of sanctions relief have argued that financial aid to Iran would be self-defeating given the vast amounts of money the leadership spends on supporting Iran’s network of partners and proxies throughout the region, and given the alleged funds held by the supreme leader.^[fn]For example, see “No time to end Iran sanctions”, Wall Street Journal, 25 March 2020; Mark Dubowitz and Richard Goldberg, “The coronavirus is absolutely no excuse to lift sanctions on Iran”, Foreign Policy, 31 March 2020.Hide Footnote But Iran’s government’s access to funds aside, sanctions have, according to most experts, impeded access to important medical items. At this stage, the humanitarian imperative ought to take primacy, not only for Iran’s sake but also to contain the virus more broadly. Indeed, Iran’s inability to contain COVID-19 will have ripple effects throughout the region. In addition, there are ways of minimising any risk that assistance could be diverted. The U.S. could require any financial aid to pass through channels, such as the one established through Switzerland, which meet Washington’s due diligence requirements, to ensure that it is used solely for the purchase of medicine, medical equipment and basic staples.

If the two sides can reach such a humanitarian understanding, it could lead to a second phase of de-escalation. The Central Bank of Iran has asked the IMF for a $5 billion emergency loan.^[fn]Najmeh Bozorgmehr, “Iran asks IMF for $5bn to fight coronavirus”, Financial Times, 12 March 2020. It is the first time in more than six decades that Iran has asked the IMF for a loan. The IMF has asked for additional data and information from Tehran, which did not allow the IMF’s mission to visit the country in 2019 for its annual evaluation of the Iranian economy. Crisis Group interview, Iranian official, Tehran, March 2020.Hide Footnote Iranian officials believe that with support from Europe they can meet the 51 per cent threshold of stakeholders’ votes required for granting the loan, even if the U.S. votes against it.^[fn]Crisis Group interviews, Tehran, March 2020. Under Section 1621 of the International Financial Institutions Act (P.L. 95-118; 22 U.S.C. 262p-4q), U.S. representatives at the IMF are required to oppose financial assistance to countries designated as “state sponsors of terrorism” by the U.S. State Department.Hide Footnote If they are correct, Trump would have nothing to lose by waiving the requirement for U.S. representatives to vote against the loan; instead, Washington could demand that the IMF transfer the funds to the Swiss humanitarian channel. Tehran could reciprocate this support by refraining from further ramping up its nuclear program and urging its paramilitary allies inside Iraq and Yemen to refrain from further attacks on U.S. or U.S.-allied forces and assets there.

Beyond the U.S.-Iranian relationship, a regional de-escalation is long overdue and made all the more urgent by the pandemic. Saudi Arabia could follow the United Arab Emirates’ example of offering assistance to Iran; Tehran could reciprocate by backing UN-led efforts to achieve a diplomatic breakthrough in Yemen. Specifically, Iran could urge the Huthis to unconditionally support a UN plan for a nationwide ceasefire and confidence-building measures that open the way to a coordinated national COVID-19 response and peace talks. For this approach to work, however, Riyadh and the internationally recognised government of Yemen will have to make the same unconditional commitments.^[fn]Crisis Group Statement, “A Coronavirus Ceasefire Offers a Way Out for War-torn Yemen”, 27 March 2020.Hide Footnote

None of this is likely or easy, but all of it should be viewed as necessary to fight a pandemic that respects no border and takes no side in geostrategic rivalries. The crisis provides an opportunity for unlocking diplomacy between Iran and the U.S. that otherwise has little chance of resuming before the end of 2020. In the absence of such diplomacy, spiralling tensions in the coming months could put many lives, Iranian and other, at risk, deepen enmity between the two nations and widen the space for miscalculation. By contrast, a mutual exchange of humanitarian measures could re-establish minimal trust and perhaps pave the way for the kind of understanding that Crisis Group and others have called for: the U.S. providing Iran with meaningful sanctions relief in return for Tehran reversing its nuclear escalation, halting its hostile regional operations and agreeing to negotiations over a broader deal.

VI. Conclusion

Nearly two years of “maximum pressure” have yielded little strategic gain for the U.S. Iran’s nuclear program has grown rather than stopped; a strategy intended to curb Tehran’s regional influence has instead led to mounting tensions across the board and repeatedly brought the two sides to the brink of open conflict. Likewise, nearly a year of “maximum resistance” by Iran has failed to yield an economic reprieve, hurting the government’s credibility with the public. The COVID-19 crisis potentially affords an opportunity to both nations to mitigate suffering and move away from zero-sum strife. The U.S. and Iran should seize it.

Washington/Tehran/Brussels, 3 April 2020