Dr. Azeem Ibrahim

Al Arabiya, 5 January 2018 – This is not how things were supposed to go in Iran. Iranians went to the polls in 2013 and elected Hassan Rouhani to serve as President of the Islamic Republic filled with hope after the harsh and belligerent tenure of Mahmoud Ahmadinejad.

Rouhani was billed as a moderate who would relax the excesses of the religious hardliners, and would mend his country’s relations to the rest of the world – especially the West. Doing so would be followed by sanction relief and economic boom, which would lift the country out of its long economic stagnation.

And it was not all just empty rhetoric. Just two years later, the Iran nuclear deal with the US, Russia, China, the UK, France and Germany came into force, and economic sanctions have been subsequently eased, as Iran has stuck to its side of the bargain.

But one thing of what was supposed to happen did not. The Iranian people did not see the economic boom they were expecting. In fact, the very opposite has happened: over the past 10 years, average Iranians have become 15 percent poorer, as a consequence of rising inflation and stagnating wages.

Rather than delivering the proceeds of peace to the people, Iran’s political leaders have instead decided to reinvest them in their regional wars to expand their sphere of influence

Azeem Ibrahim

The windfall

And the trend has in fact accelerated over the past year – exactly when Iranians would have expected that things would start to turn around. So what happened to the windfall they were expecting?

Iran did in fact reap the reward of sanctions relief. And to the tune of tens of billions of dollars. It’s just that the windfall was not put back into the local economy by the Iranian leadership. Rather than delivering the proceeds of peace to the people, Iran’s political leaders have instead decided to reinvest them in their regional wars to expand their sphere of influence.

Iran pays the salaries of hundreds of thousands of fighters on the side of Bashar al-Assad in Syria alone, but has paid militant proxies also in Iraq, Yemen, Lebanon, Afghanistan, Pakistan and the Palestinian territories, at the very least.

In Syria alone, it is estimated that Iran is spending as much as $15-20 billion a year, including covering a substantial share of Hezbollah’s costs. The amount it spends on all the other proxies and the conflicts they sustain is harder to quantify, but it would not be an insignificant amount extra.

To put this into context, the final yearly expense probably comes to somewhere in the region of 4-5 percent of the country’s $438 billion GDP. In other words, every year, the country’s leaders take 4-5 percent out of the country’s economy and spend it on sustaining or escalating conflicts throughout the Middle East.