Iran, which was already grappling with the need for foreign investment of over $500 billion for the upgrade of its old-fashioned infrastructure, now finds itself needing to financially recover after a 12-day war against Israel. The war, albeit brief, caused a significant devastation and could require a reconstruction cost surpassing half a trillion dollars. The economic consequences of this war are compounded by sanctions, capital departures, and an uncertain investment environment.
As a result of the war aftermath, Tehran is confronted with the unsettling reality that the meager resources meant to be dedicated toward social welfare and serious infrastructure enhancements will instead be used to carry out basic restoration works. This shift serves a dual purpose: quell the internal unrest and assuage apprehensive allies. The damages were extensive, spanning from infrastructure to energy sectors, amounting to billions of dollars.
Israeli interventions during this conflict not only included missile attacks but also cyberattacks. A heart-wrenching consequence of these assaults was the damage or complete destruction of around 120 residential towers, power stations, as well as critical nuclear-enrichment facilities. As an additional ramification, internet outages prior to the cessation of hostilities resulted in an estimated loss of around $500 million.
Before the war, Iran had calculated substantial foreign investment- upwards of $500 billion- was required to bring their dated roads, electricity grids, and ports up to date. Now, a significant portion of their existing resources will be redirected to recovery efforts in the aftermath of the devastation, forcing the government to either postpone or cut back major developmental projects intended to appease its fatigued populace.
When Iran went to war, they had stipulated the release of approximately $70 billion in overseas assets and were actively negotiating substantial energy agreements with India, China, and Russia. However, these ambitions have been temporarily put on hold as a result of the conflict.
The piling pressure from tightened sanctions, investor apprehension of renewed instability, and even hesitations voiced by previously consistent buyers like China, adds to the challenges faced by Tehran. Consequently, it is contended that Iran now grapples with an escalating economic crisis, marked conspicuously by capital outflow and limited credit.
The resulting economic strain has given rise to social unrest. Basic commodities have seen a sharp rise in their prices, resulting in heightening unemployment in the most affected provinces. In response to the growing dissent, the regime has resorted to mass detentions and swift executions as deterrence measures.
To manage the recovery process, a Supreme National Security Council comprising high-ranking defense, intelligence, and legal office-bearers has been inducted. Their immediate concerns involve restoring power to the industrial hubs, reopening the damaged highways, and reassuring overseas insurers about the safety of shipping routes and pipelines.
However, achieving these tasks promptly will be an uphill battle due to the lack of hard currency. This financial shortfall restricts Iran’s ability to rebuild its Islamic Revolutionary Guard Corps (IRGC) missile sites and to resume advanced centrifuge production – the very projects that once provided them with negotiation power during nuclear discussions.
Several Israeli strikes during the conflict resulted in the loss of no less than 11 senior scientists and 20 IRGC commanders, impacting the country’s technical know-how and leadership. Therefore, Iran is now likely to encounter difficulties in quickly rebuilding these capacities, subsequently postponing any plans to fully resume enrichment operations or to reclaim its power projection in the region.
At present, no other nations have extended aid to Iran. Also, Iran’s dependence on cyber-proxy groups and criminal networks has further enhanced its status as an outcast. If the regime fails to show tangible progress in the forthcoming six to twelve months, it could face economic discontent conflating with political resentment over succession plans for Supreme Leader Ali Khamenei, who is currently 86.
The post Iran Faced with Economic Crisis after Brief War with Israel appeared first on Real News Now.
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