Iran activates its ‘resistance economy’ to survive the war

{"text":[[{"start":11.39,"text":"Over four decades, Iran has built what it calls a “resistance economy”, designed to withstand conflict, sanctions and hostility with nations near and far."}],[{"start":23.28,"text":"The Islamic republic manufactures products it struggles to import, including pharmaceuticals, car parts and white goods. "}],[{"start":32.32,"text":"Its several hundred power plants are dispersed around the country, a lesson learned after the 1980s Iran-Iraq war in part to make it more challenging to destroy the network. And it uses barter to get around sanctions, exporting oil in exchange for food and machinery."}],[{"start":51.91,"text":"This model, which has helped the regime survive even if it has presided over a deepening economic malaise, is now being put to the ultimate test."}],[{"start":62.05,"text":"Since launching the war on February 28, the US and Israel have pounded Iran with thousands of air strikes, assassinating its leaders and targeting its military infrastructure. Critical infrastructure has also been hit, including fuel storage depots, Iran’s largest gas complex and even a bank — all in an effort to weaken the regime’s grip."}],[{"start":87.05,"text":"Some industrial factories have already been damaged in the bombing, according to Iranian media, including two of the republic’s largest steel plants, which were hit on Friday."}],[{"start":98,"text":"Steel is an important non-oil export for Iran —Esfandyar Batmanghelidj, chief executive of the UK-based Bourse & Bazaar Foundation think-tank, estimated the republic was on track to export around $7bn of steel products during the last Iranian year."}],[{"start":118.14,"text":"This has added to the severe strain on a country in deep crisis well before the war began. With inflation at more than 40 per cent, living standards had dropped precipitously and anger over the state of the economy has been a major driver of anti-regime unrest. "}],[{"start":137.68,"text":"Yet despite this, analysts say there are signs that the “resistance economy” is so far doing some of what it was meant to."}],[{"start":145.91,"text":"The cost of the war to Iran will be severe, with the ensuing economic pressures likely to fuel further domestic discontent. But for now, it is about survival for the regime. "}],[{"start":160.41,"text":"“There’s no doubt Iran’s economy is going to face a shock because of this war,” said Batmanghelidj. “But I don’t think the economic crisis is going to be the thing that breaks the back of the Iranian state in the conflict.”"}],[{"start":176.19,"text":"“From the standpoint of Iranian authorities their challenge is not to try and operate the economy normally,” Batmanghelidj added. “There’s a lot of scope to cannibalise the civilian economy to furnish this kind of war economy.”"}],[{"start":null,"text":"

"}],[{"start":192.44,"text":"In the build-up to the war, President Masoud Pezeshkian decentralised authority to provincial administrations, enabling them to speed up imports. Bureaucratic hurdles have been eased and approvals fast-tracked. "}],[{"start":208.22,"text":"Trade has continued over land borders, despite little commercial shipping transiting through the Strait of Hormuz, Iran’s main gateway for exports and imports that the Islamic regime has in effect blocked."}],[{"start":223.45,"text":"Even with the relentless bombardment that Iran is enduring, authorities have sought to project stability, insisting that there are no shortages of essential goods. "}],[{"start":234.57999999999998,"text":"Supermarket shelves remain stocked, with fresh produce widely available. A spell of petrol rationing helped stabilise fuel supplies after Israeli strikes on Tehran’s storage facilities triggered temporary shortages."}],[{"start":250.07,"text":"But if US President Donald Trump follows through on his threat — on hold for now — to hit Iran’s power plants, the economic situation would deteriorate rapidly."}],[{"start":263,"text":"Iran was in severe economic decline before the war began, thanks to a combination of sanctions, mismanagement, falling oil revenues and widespread corruption. "}],[{"start":275.28,"text":"This helped fuel mass anti-regime protests, triggering a brutal crackdown in January that killed thousands. Israel’s 12-day war against the republic last June also helped to stoke a sense of malaise. "}],[{"start":289.78,"text":"Still, an Iranian former economic official said that despite the pressure on the economy, it has the resilience to survive even if the war lasts a year. "}],[{"start":null,"text":""}],[{"start":301.55999999999995,"text":"Iran has one of the region’s most diversified and industrialised economies — despite dysfunction and inefficiencies — with its roots in the modernisation drive led by the last shah in the 1960s and 1970s, analysts say."}],[{"start":317.88999999999993,"text":"The theocratic regime and private businesses were built on this base in response to decades of US and western sanctions after the 1979 Islamic revolution. They became more adept at circumventing sanctions, building alternative trade routes and accelerated substituting imports during Trump’s first term, when he tightened sanctions and cut Iran off from the global financial system."}],[{"start":344.9799999999999,"text":"Iranian industry can “flexibly move from imported to domestic goods”, said Djavad Salehi-Isfahani, an Iran-born economist at Virginia Tech. "}],[{"start":356.5799999999999,"text":"“It’s what makes Iran distinct from its Gulf neighbours. It has an industrial base that’s been going on since the shah’s days,” he said. “They can survive at some basic level, but life is going to be very hard.”"}],[{"start":371.5199999999999,"text":"Batmanghelidj said the country was not solely dependent on oil and can earn $2bn a month from exports of products such as metals, chemicals and food to compensate."}],[{"start":384.6099999999999,"text":"“The lifeblood of the Iranian economy is not oil exports,” he said. “Even if you eliminated the oil trade completely . . . Iran could conservatively maintain its exports through the other customs exits as long as the inventories are in place to keep producing goods.”"}],[{"start":405.0099999999999,"text":"But disruption in the Strait leaves Iran vulnerable in other ways. While Iranian authorities say the country produces roughly 80 per cent of its food domestically, Iran still imports part of its wheat, oilseeds and rice requirements. It is also largely dependent on soyabeans, corn and other grains to feed livestock."}],[{"start":428.5499999999999,"text":"These typically rely on complex logistics chains and are often routed through the United Arab Emirates — which has borne the brunt of Iran’s attacks against the US’s Gulf allies — much of it using Dubai’s Jebel Ali port and dhows. The UAE has hardened its rhetoric against Iran as the war jeopardises the republic’s trade relations with one of its key import and export hubs."}],[{"start":454.0499999999999,"text":"With maritime traffic through the Gulf severely disrupted, alternative routes including rail links between China and northern Iran and smaller ports such as Chabahar in southern Iran offer potential workarounds, albeit at significantly lower capacity. Iran has also allowed a limited number of cargo ships carrying grains and other agricultural goods through the strait."}],[{"start":480.0899999999999,"text":"“It’s true that there are other options,” one Iranian commodity importer said, but added that these alternatives did not have comparable capacity to Imam Khomeini port in the Gulf, Iran’s largest. “It might work in the short term, but will be a major challenge in the long run.”"}],[{"start":499.4699999999999,"text":"So far, the state — the biggest employer — has continued to pay civil servants and year-end bonuses, despite some disruptions caused by cyber attacks on the banking system. Food prices have not been as volatile as in recent months, partly because the currency market has in effect become inactive."}],[{"start":520.4499999999999,"text":"Those who rely on daily wages — such as drivers and cleaners — have sought to carry on working, even as a drop in demand during the war has strained their livelihoods."}],[{"start":null,"text":""}],[{"start":531.5799999999999,"text":"The US-Israeli attacks have also brought at least one paradoxical boost to Iran’s economy: higher oil prices."}],[{"start":540.8799999999999,"text":"With Brent crude prices above $100 for much of the past month, foreign analysts estimated that the country was earning more than $140mn a day as it continued exporting millions of barrels, with the US saying it was prepared to tolerate the sales in order to bolster global supplies."}],[{"start":562.3799999999999,"text":"“The rise in oil prices has already helped Iran’s economy and compensated for part of the war expenses,” said a senior Iranian trader of energy byproducts. “These [sales] mean a few billions of dollars more in revenues.”"}],[{"start":577.1099999999999,"text":"But Batmanghelidj said that Iran’s economic resilience can only go so far. If the US and Israel expand their attacks to a broader campaign against Iran’s civilian infrastructure, the country could be plunged into a much deeper crisis."}],[{"start":null,"text":""}],[{"start":593.8499999999999,"text":"“If the US and Israel decide to hit civil infrastructure, like power plants, then the impact can be much more profound much more quickly,” he said."}],[{"start":605.9999999999999,"text":"But he added that the Iranian retaliation this could provoke against comparable infrastructure in Gulf states means that “even if that shortens the duration of the war . . . maybe the cost borne by all the parties will be just as high”."}],[{"start":621.7799999999999,"text":"Salehi-Isfahani said that even if the regime does survive the war, Iran’s road to recovery would be long. “You can’t have this level of destruction and bombs and not be set back 10 years or more,” he said."}],[{"start":636.0699999999998,"text":"Graphics by Aditi Bhandari"}],[{"start":650.8299999999998,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1774856809_9372.mp3"}