Iran's Instagram Crackdown is Jeopardising Women's Livelihoods

Iranian women have been striving to enhance their socioeconomic status, both online and offline. Statistics show that this is not an easy task: in 2023, the World Economic Forum ranked Iran 143rd out of 146 countries in its annual gender gap report. Iran also sits at 144th for economic participation and opportunity. Consequently, many women resort to informal employment in areas such as sales, homeworking, catering, and domestic work. Due to the informal nature of this kind of work, it is difficult to collect data on the number of women in such roles.

Although it has become increasingly difficult for Iranians—particularly women—to make a living, many micro-entrepreneurs have used Instagram to start businesses. Due to its relatively low entry barriers and easy access to potential customers, the platform had been ideal for this purpose. However, Iranian women are now encountering serious obstacles. A move by authorities to block Instagram and throttle internet speeds, as well as steep increases in internet package prices and arrests of prominent influencers, have all made it more difficult for women to seek economic opportunities online.

World Bank figures from 2021 show that approximately 79 percent of Iran’s population uses the internet. In February 2024, the Iranian Students’ News Agency (ISNA) reported that after Telegram, WhatsApp was the most popular platform, with about 47.7 million users. Instagram ranked third, with 47 million users. Of Iranian Instagram users, 46 percent are female—more than 21 million women.

For the last five years, Abolfazl Hajizadegan, a sociologist at the University of Tehran, has published an annual report on Iran's social media sphere. Hajizadegan’s most recent report clearly shows that, despite the shutdown of Instagram by the Islamic Republic (which occurred at the beginning of the Woman, Life, Freedom movement in Iran), women persist in their online presence.

In this piece, I have chosen to focus specifically on accounts from which influencers generate income. The accounts I discuss do not necessarily belong to the most famous people but to ones who have amassed a large number of followers and are engaged in online business.

The table above is drawn from Hajizadegan’s reports and shows that the share of women has increased among Iranian social media influencers. Among lifestyle-oriented accounts on Instagram, the proportion of women has risen from 58 percent in 2019 to 89 percent in 2023. One of the women who has experienced the highest growth in followers in recent years is Yegane Rezaee, a lifestyle blogger. With one million followers, she chronicles her daily life and earns an income through sponsored posts.

Women are strongly represented among fashion and beauty accounts and one of the influencers in this area is Farzaneh Mezon, who has 153,000 followers. Mezon advertises her products by showcasing various outfits in the photos she uploads. Perhaps because of her popularity, her online store was blocked in July 2023. She soon posted the following statement on Instagram: “Our website has been blocked by a court order. We have been asked to delete all photos that go against Islamic values and the proper hijab framework.” Farzaneh was able to continue her work after appealing to her followers, who wrote comments of solidarity under the post and vowed to support her in making the necessary changes to her website.

Iranian women also account for a growing share of Instagram accounts focused on educational content. The share of women-led accounts has risen from 14 percent in 2019 to 45 percent in 2023. Havin Hosseiny manages a page that focuses on empowering women by improving their life skills. Her bio states, “Our goal is to improve women’s mental health and help them increase their income.’’ With 739,000 followers, she explains gender equality to the audience on her page by publishing short animated videos with attractive content and simple language. She also founded the Havin School, which offers online courses for women that focus on issues such as personal relationships, career advancement, self-confidence, stress reduction, and financial awareness. In addition to providing free educational content, she earns money from other educational workshops.

In the comedy and entertainment field, the gap between women and men remains significant despite women’s share increasing from 6 percent in 2019 to 29 percent in 2023. Zeinab Musavi, known as Emperor Kuzco, creates short comic videos. With 645,000 followers, she is one of the most famous Iranian comedians online. To earn an income, she asks her followers to donate any amount they wish: “These videos I create and publish on this page are my job. And if you enjoy them, you can contribute through two links I have provided in my bio.’’

Men dominate the sports pages. However, pages such as the one run by Elnaz Rekabi, a competition climber with 653,000 followers, are among the most popular on Instagram. It is worth bearing in mind that the low number of women participating in this field likely reflects restrictions placed on female athletes. For instance, the Instagram page of Sogol Rahbar, a bodybuilder with 290,000 followers, was temporarily shut by the Law Enforcement Command of the Islamic Republic of Iran, known by its Persian acroynym, FARAJA. A post on Rahbar’s account carried this message: “Due to the publication of criminal content against public morals and decency, Faraja has blocked this page.’’ However, after deleting posts deemed to depict “improper hijab,’’ Sogol resumed her activities. She earns money through advertising, providing exercise and nutrition programmes, and conducting online classes.

According to Hajizadegan’s research, women do not run any popular religious pages. However, conservative values are represented in other spheres. For example, there are business pages run by conservative women, one of whom is Khadije Faghih, who teaches mat weaving and has 37,800 followers. In addition to publishing free educational content, she earns money by holding classes.

Because Iranian women are excluded from the formal economy, many have sought opportunities in the informal economy. The widespread use of social media platforms has allowed many creative and enterprising women to engage in online business. Instagram is one of the most widely used platforms in Iran, but the crackdowns following the Women, Life, Freedom movement, have created new obstacles for women seeking opportunities on the platform. Moves by authorities to pressure women to observe the “proper hijab’’ have economic consequences. Moreover, President Ebrahim Raisi has yet to fulfill an election promise to provide free internet to all people on low incomes. Instead, internet prices remain high, and the government filtering of platforms like Instagram means that people are forced to buy virtual private networks (VPNs). This has dramatically reduced internet access for economically disadvantaged women.

According to the Tehran-based Beta Research Center, more than two million Iranian businesses market products and services on Instagram, and less than one-fifth of these enterprises also sells their products offline. Importantly, 64 percent of these businesses are owned by women, who have been disproportionately impacted by the internet crackdowns. Rural women who relied on online businesses for their livelihoods have been especially affected—many have been forced to peddle their products on city streets.

In February, Iran’s National Center for Cyberspace officially prohibited the use of VPNs. At present, despite campaigns to repeal the new prohibition, the future of the Iranian internet is uncertain. In recent years, Iranian women have accounted for a growing share of major accounts on Instagram, seizing economic opportunities that are unavailable in Iran’s offline economy. Today, their livelihoods are in jeopardy.

Photo: Farzaneh Mezon

Climate Policy and Cross-Border Hydrocarbon Development in the Gulf

This article is part of a series exploring regional energy cooperation in the Gulf and is published in cooperation with Istituto Affari Internazionali.

The Gulf countries are leading global producers and exporters of oil and gas. They have long reserves lives at current production levels, well beyond 2050, and substantial potential to increase reserves through field development, enhanced recovery, and exploration. They are intrinsically low-carbon producers measured by upstream emissions per barrel, although this is obscured in Iran and Iraq by high levels of flaring of unused associated gas (a by-product of oil production) and leakage of methane. They have strong involvement of state oil companies in oil and gas production, though this varies from an effective monopoly (Kuwait) to a leading role for international operators (Iraq and Oman).

With the exception of Iraq, they have large domestic petrochemical industries. Saudi Arabia and, increasingly, the UAE, have extensive international investments in refining and petrochemicals across the US, Europe, and Asia. While this is mainly on their own account, Kuwait does have a stake in the important new Duqm refinery in Oman. The region’s oil exporters also make use of the extensive oil storage and bunkering facilities in the UAE and Oman. On the other hand, Qatar is the world’s biggest LNG exporter and has a major expansion programme to be completed during 2026-27, Oman and the UAE are smaller LNG exporters (the UAE also expanding), while Iran is an important supplier of gas by pipeline to Turkey and Iraq.

The role of the Gulf states as oil exporters has limited the potential for cooperation between them. The dominance of the state in the upstream industry means that cross-border hydrocarbon investment is very limited. Mubadala Energy, the energy arm of the Abu Dhabi government strategic development company, has some upstream assets in Qatar and Oman, and utility Taqa has oil operations in the Kurdistan region of Iraq. QatarEnergy recently entered a project in southern Iraq led by TotalEnergies for development of oil, gas, water injection and solar power. Sanctions and political disputes have prevented any GCC investment in Iran’s hydrocarbon sector. There has been some interest, for example, and various plans since the early 2000s for gas and electricity connections, and most recently, discussions between Saudi Arabia, the UAE, and Iran in July 2023 concerning investment and the development of shared fields.

Gas is more promising for cooperation, given that some of the Gulf states are relatively gas-short. The most notable project, Dolphin, exports gas from Qatar by pipeline to the UAE, with small volumes continuing to Oman. Dolphin faced opposition from Saudi Arabia, which argued that the pipeline crossed its own maritime territory. A similar plan to supply Qatari gas to Kuwait was entirely blocked by Saudi Arabia, which did not want the smaller GCC states to be linked beyond its influence. Although LNG exports from Qatar to the UAE stopped during the boycott of Doha between June 2017-January 2021, Dolphin continued operating as normal, a sign of its importance to both countries, and of the promise of energy projects to constrain conflict.

Some oil and gas fields in the Gulf lie across borders. In general, countries have developed them competitively, extracting as much as possible without an agreement with the neighbouring state. The most notable field affected by a boundary dispute is the large gas-field Dorra, known in Iran as Arash, which lies partly in Kuwaiti waters, partly in the Kuwaiti section of the Partitioned Neutral Zone with Saudi Arabia, and partly, in Tehran’s view, in Iranian waters. Kuwait’s shortage of gas leads to heavy domestic use of polluting and expensive oil. An agreement on Dorra, perhaps via a joint development zone without concession of sovereignty, could be a way forward. Such agreements have enabled Saudi Arabia to supply half of the oil from the Abu Safa field to Bahrain as part of a boundary settlement and Qatar and the UAE to divide the resources of the offshore Bunduq oil-field.

The most important cross-boundary field, not just in the Gulf but in the world, is called the North Field in Qatar and South Pars in Iran. It is world’s biggest gas field. The field, which also contains shallower cross-boundary oil resources, has been developed by each side without formal agreement, but there are tacit understandings to avoid one side moving too far ahead of the other on extraction levels. Qatar imposed a moratorium on further development of the North Field in 2005, and lifted it in 2017. Ostensibly this was for technical reasons, more plausibly for gas market management purposes, but it also gave Iran time to catch up to and even exceed relative Qatari production levels. As Iran’s own output from South Pars increased, so eventually Qatar was able to decide to raise production further, without risking tensions with Iran over unfair levels of extraction.

More intra-regional gas trade would enable reducing the use of oil in the power sector. Qatar, Iran (if its gas resources were properly developed), and the Kurdistan Region of Iraq, would be natural gas suppliers by pipeline to neighbours. This would require more regional trust, and transparency to put gas supplies on a reliable commercial basis. Cross-border investment in gas-using sectors such as petrochemicals, multi-country gas networks, and robust arbitration procedures, could create structures that would be more resistant to politically- or commercially-motivated cut-offs. Iran is, for example, a 10 percent shareholder in Azerbaijan’s important Shah Deniz gas field and in the South Caucasus Gas Pipeline from Azerbaijan to Turkey via Georgia, along with BP, Russia’s Lukoil and Turkish and Azeri state entities. But the recent history of Russian gas supplies to Europe, and the interruption of federal Iraqi and Kurdistan region oil exports through Turkey, reveals how even long-standing pipeline deals with strong mutual profitability can be derailed.

As COP28 in Dubai signalled, climate policy will exert ever-greater influence on the oil and gas industry: first through requirements to zero-out its own emissions, second through a longer-term reduction in demand, at least for oil. The Gulf countries present a wide spread of economic and environmental vulnerability, and sophistication of climate policy ranges from the very limited (Iraq) to the relatively advanced (UAE). The Oil and Gas Decarbonisation Charter (OGDC) concluded at COP28 was signed by the national oil companies of Abu Dhabi, Sharjah, Bahrain, Oman, and Saudi Arabia, among others, but not by Iran, Iraq, Kuwait, or Qatar.

With the exception of Qatar, all of the Gulf countries are members either of OPEC or the OPEC+ alliance. OPEC and the OGDC, as well as other structures such as the Oil and Gas Climate Initiative, offer potential to foster cooperation on decarbonisation paths within the petroleum industry, which include ending flaring and methane leakage, improving energy efficiency, electrifying operations, and incorporating renewable and nuclear power, implementing carbon capture and storage, piloting carbon dioxide removal technologies, producing sustainable aviation and maritime fuels, and developing hydrogen and its derivatives.

Specific cooperation would include aligning standards and regulations; sharing technological learnings and best practices; conducting joint studies on regional carbon dioxide storage capacity or satellite monitoring of methane leakage; and possibly some shared infrastructure, though this is more challenging and probably not essential. Joint investments, either within the Gulf countries or in third countries, could include the production of low-carbon hydrogen and sustainable fuels.

This collaboration can also include policy-related and diplomatic endeavours, on areas such as carbon caps, prices or taxes, international carbon trading under the Paris Agreement’s Article 6.4, dealing with the growing use of carbon border tariffs, and appropriate certification and regulation for low-carbon hydrogen.

The global energy market has been evolving rapidly, notably with the rise of Asia as the world’s key importer and consumer of energy and emitter of greenhouse gases, and the evolution of the natural gas business into a truly internationalised market via LNG trade. Most recently, the Russian invasion of Ukraine, the elimination of most of its pipeline gas exports to the EU, and a near-total ban on imports of Russian oil by the EU and other Western countries, have reshaped the global energy market and the patterns of trade in Gulf energy. The increasing US-China tensions, and the moves towards more diversity and robustness in supply chains and greater domestic self-sufficiency in key energy-related materials and technologies, is another emerging and evolving theme.

Greater Gulf cooperation on hydrocarbons, as a part of balanced strategies incorporating climate protection, could manage some of these threats and promote longer-term cooperation solutions to problems facing the region’s critical economic sector.

Photo: Aramco

Pipelines and the Challenges of Energy Integration in the Middle East

This article is part of a series exploring regional energy cooperation in the Gulf and is published in cooperation with Istituto Affari Internazionali.

Energy cooperation in the Middle East has long been pursued through the establishment of petroleum pipelines, built with the goals of connecting to energy markets in the broader Eurasian context, diversifying oil export routes, and reducing vulnerability. After several years of renewed regional diplomacy in the Gulf and an increase in the level of regional trade and investment, energy integration is once again on the agenda in bilateral and multilateral forums.

However, in a region characterised by both internal instability and external threats, most intra-regional energy trade agreements have been short-lived. The legacies of the Middle East’s major oil and gas pipelines offer important lessons for regional leaders hoping to integrate energy markets and infrastructure.

The region’s seven major pipelines have existed for a cumulative 445 years. But they have only been active for 168 of those years. In other words, the seven pipelines have been operational for just one-third of their lifetimes. Every international oil pipeline in the region has also shut down at least once, and the majority remain closed today.

Political conflicts within producing and transit countries, as well as interstate disputes, remain the primary reasons for pipeline shutdowns. While the mutual dependency stabilising factor ensures continued oil supply from the region, short-term interruptions persist due to geopolitical tensions. Historical events like the Arab oil embargoes and international sanctions against Iraq and Iran underscore the region's susceptibility to temporary disruptions. The military attacks during the eight-year war between Iran and Iraq (1980-88) prompted a reconsideration in pipeline strategies in the region as the conflict both underscored the vulnerability of the infrastructure to military attacks, but also their potential in assisting countries at times of isolation.

For example, Iraq, whose meagre Gulf coastline was blocked during the war and its export outlets through the Mediterranean (Syria and Lebanon) were shut down, sought to diversify its export channels through pipelines with Turkey and Saudi Arabia. Iran, on the other hand, facing security concerns due to sporadic Iraqi air strikes on its territories, also explored pipeline options to bypass vulnerable terminals. But the 1986 Iraqi strikes on Iran’s Larak and Sirri terminals raised doubts about the security and usefulness of such infrastructure, resulting in the postponement or cancelation of many pipeline projects.

In the 1980s, to reduce  dependence on the Strait of Hormuz and vulnerability to Iranian threats, Saudi Arabia built its main export pipeline “Petroline” from the oil-producing Eastern Province to Yanbu on the Red Sea. Yet, liftings at the Red Sea must transit through the Suez Canal which is controlled by Egypt or through the Strait of Bab Al-Mandeb which is controlled by Yemen. Oil could also be piped through the Sumed pipeline which links, within Egypt, the Gulf of Suez to the Mediterranean, or through the Eilat-Ashkelon pipeline in Israel. But these avenues pose their own challenges.

The Eilat–Ashkelon pipeline has recently gained attention, with press reports of the UAE considering it for transporting crude from the Red Sea to the Mediterranean. Interestingly, this pipeline was built in 1968 as a joint-venture between Israel and Iran to transport Iranian crude oil to Europe. However, Iran ceased using the pipeline following the 1979 Revolution and the subsequent nationalisation of the pipeline by Israel. Today, with the ongoing war in Gaza and the fate of Arab-Israeli normalisation agreements mean the future of this pipeline is uncertain.

Limited Success in Gas Cooperation

In the realm of gas pipelines, the Middle East has seen some limited success, but only few interstate gas pipelines have been built. The first interstate gas line in the region was built in 1986 linking Iraqi fields to Kuwait. This short-lived pipeline closed after the Iraqi invasion of Kuwait and switched to supplying water for Iraqi troops. Around the same time, a small gas link was constructed between Oman and the UAE’s emirate of Ras Al-Khaimah. That link later expanded and became the much larger Dolphin pipeline which came on stream in 2007, supplying Qatari gas to the UAE and Oman.

In the Eastern Mediterranean, a gas pipeline linking Egypt and Israel was initially built to channel Egyptian gas to Israel, before reversing its flow to supply Israeli gas to Egypt. On a more regional scale, the Arab Gas Pipeline (AGP), built in 2003, has been linking Egypt, Jordan, Syria, and Lebanon, and has plans to connect to the European network in Turkey. However, the AGP has faced serious challenges since its inauguration, including the acute shortage of gas feedstock from Egypt.

The development of liquified natural gas (LNG) has also dealt a blow to the prospects of increasing gas pipelines around the Middle East. In fact, Bahrain, the UAE, Kuwait, and Jordan are already operating LNG import terminals, while Oman, Saudi Arabia, and Lebanon are pursuing the same strategy as well. The LNG option has been favoured over gas pipelines as a result of many factors, including the security related factors as well as the competitive costs and prices for building the different parts of its chain, i.e. the liquefaction plants, transport vessels, and regasification units.

Revitalising Pipelines

Despite persistent challenges, international pipelines are needed in the region and they can be an efficient and secure way of energy trade, if operated properly. To turn a new page, addressing various issues is crucial. First and foremost, the issue of transit fees must be clearly resolved, especially if a third country is involved in the transit. Those fees, returned in cash or commodities, could well affect the entire economic feasibility of a pipeline network project.

Adherence to World Trade Organization (WTO) agreements is also a significant challenge. In fact, each member of the WTO has to give the owner or operator of any pipeline passing through its territories full and free access to its own domestic market. That right for market access has not always been admitted by all Middle Eastern countries.

There is also the question of “energy independency” which needs to be addressed. In the Gulf and the broader region, governments are hesitant to depend on neighbouring countries for their fuel supplies. At the same time, the psychological desire among oil-producing countries for self-sufficiency also promotes a greater willingness to burn more liquid fuels than import gas, despite their higher relative and opportunity costs and the damage they induce on the environment.

Trust building measures and gradual expansion of bilateral and multilateral engagements could contribute to increasing energy cooperation, in addition to increasing the interdependency between the countries along the routes of pipelines through transit fees and large reliance on the pumped supplies.

Gas pricing is a challenge which is further compounded by the fluctuations in demand throughout the year. Demand for electricity, and consequently for natural gas, peaks in the summer for the majority of countries in the region, and consequently gas sales fall in the winter. To offset these challenges, regional countries could either create storage facilities at the upstream producing end or at the downstream consuming side. This requires much closer regional cooperation on gas.

While the challenges are evident, the pursuit of energy cooperation through pipelines in the Middle East remains a complex yet vital endeavour, requiring continuous adaptation to geopolitical realities and global market dynamics. Despite the current favouring of LNG over gas pipelines, policymakers must keep the idea of building a regional gas network on the agenda.

Regional players need to learn from past failures and match infrastructure with institutions to provide platforms for dispute resolutions and enhanced cooperation. Such a way forward could bolster regional economic development, enhance intra-regional trade, and contribute to long-term political cooperation and economic integration in the broader region.

Photo: Aramco

Regional Economic Integration Comes into Focus at Second Baghdad Conference

The second meeting of the Baghdad Conference on Cooperation and Partnership took place in Amman, Jordan on December 20. Last year’s meeting in Baghdad initiated a process for multilateralism, dialogue, and cooperation between Iraq and its neighbours, some of whom met for the first time in years. This year’s gathering in Amman cemented the initiative as an annual regional summit and, importantly, added economic integration to the regional agenda.

In August 2021, former Iraqi prime minister, Mustafa Al-Kadhimi, with the support of French president Emmanuel Macron, managed to bring together officials from Egypt, Iran, Jordan, Kuwait, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates, as well as representatives from the European Union, Gulf Cooperation Council (GCC), Arab League, Organisation of Islamic Countries, and the United Nations. This year, in addition to all those who participated in the first conference, the two missing GCC states—Oman and Bahrain—were present as well.

Al-Kadhimi largely succeeded by focusing on foreign policy, particularly as he sought to ease regional tensions. He was instrumental in revitalising relations with Iraq’s neighbours, which had been strained for years. He was also key in kickstarting dialogue between Iran and Saudi Arabia, as well as setting the stage for Iran-Egypt and Iran-Jordan talks. His hosting of the first Baghdad Conference positioned him—and by extension Iraq—as a trusted regional intermediary.

That is why Iraq’s recent transition to a new government was initially met with concern around the region. Mohamed Shia Al-Sudani’s seemingly pro-Iran stance was expected to once again strain Iraq’s ties with its Arab neighbours. There were reports that Saudi Arabia paused negotiations with Iran because of this change of government in Baghdad. But Al-Sudani’s efforts to retain the mantle passed by Al-Kadhimi put regional leaders at ease. He has committed to continuing his predecessor’s efforts to secure regional and international support for the development of Iraq—Baghdad remains in the title of the conference for this reason.

At the conference, Al-Sudani said, “The priority now lies in strengthening the bonds of cooperation and partnership between our countries through interdependence in infrastructure, economic integration and joint investments.” To that end, he argued that regional states should “strive to work together to transform from consuming to manufacturing countries by establishing joint industrial zones that enhance our collective industrial capacity and link the supply chains to one integrated chain capable of competing in global markets and launching mega projects in various sectors.”

By focusing on economic opportunities, Al-Sudani connected the Baghdad Conference to a wider agenda. He was also making an appeal for support from partners beyond the region, such as the European Union. EU High Representative Josep Borrell was present at the gathering in Amman.

In the Joint Communication on a “Strategic Partnership with the Gulf,” which was published in May 2022, the European Union praised the first Baghdad Conference and committed to supporting the region-led process. While France was the only European country supporting the Iraqi initiative initially, the European Union called for a follow-up process to the Baghdad Conference “with EU involvement” and as part of “a structured, EU-facilitated dialogue process”.

In the face of rising competition with other external players, such as China, Russia, and even India and Japan, European countries and the EU are falling behind. But Europeans can make significant contributions towards regional dialogue on economic integration by helping to create multilateral platforms, transfer know-how and technology, and provide financial support. European expertise can help the region find ways to jointly tackle the basic issues that have impeded economic growth and have resulted in spillover effects, such as increased food insecurity and inability to mitigate the rising challenges of climate change.

Establishing a new development fund by using existing instruments and institutions is key. This would mean including sovereign wealth funds, co-investment programmes, economic zones, or multi-party investment initiatives through regional banks or multinational institutions. The Islamic Development Bank, the various state-owned sovereign wealth funds within the GCC, as well as the European Investment Bank, and the European Bank for Reconstruction and Development, have all supported projects that have a multilateral or regional outlook. This could happen through matching funds allocated to the initiative by involved parties.

Through its Global Gateway project, the EU and regional partners could also “explore joint initiatives in third countries through triangular cooperation, financial support, capacity building and technical assistance.” The EU can draw in the regional players to help with reconstruction efforts in Iraq. The Global Europe Instrument foresees projects and investments in Iraq as well. The Instrument aims to fund international cooperation through grants, technical assistance, financial instruments, and budgetary guarantees.

Cooperation in developing a particular port or completing segments of Iraq’s national railway should be the priority. Exploring joint investments in Iraq’s oil and gas industry as well as green energy transition should also be considered.

Dust and sandstorms, as well as drought and water scarcity, are causing huge financial and human costs for Iraq, but also for all neighbouring countries, as well. Key projects that combat shared environmental challenges, which have proven to be the easiest avenue for cooperation, should be explored.

Even though various regional tensions remain, the outlook for regional cooperation and multilateralism seems bright and the Baghdad Conference is helping define a framework for broader regional cooperation, with integration as its aim. As Dutch diplomat Jeanine Hennis-Plasschaert, Special Representative of the Secretary-General for the United Nations Assistance Mission for Iraq, reflected during the meeting, the “demonstration of regional partnership” can now “result in a number of concrete steps.” Hennis-Plasschaert added that these steps “might even lead to a framework for regional integration as an effective means of achieving prosperity, peace and security.”

Photo: King Abdullah Press Office

Russia’s Economic Crisis Threatens Uzbekistan from Within

This article was originally published by the East Asia Forum.

Russia’s invasion of Ukraine is devastating the lives of Ukrainian civilians and impacting the global economy. Low-income economies that were hit hardest by the COVID-19 pandemic, such as Uzbekistan, are the most vulnerable to supply chain disruptions and potential political unrest caused by the invasion.

Significant attention has been paid to the impact of the Ukraine crisis and Russia’s economic contraction on Uzbekistan. But this analysis is somewhat incomplete—Uzbekistan’s exposure to the crisis does not just stem from the contraction of remittances coming from Russia.

The greatest danger for Central Asian economies emanates from weak political institutions. The economic shock rippling from Russia to Uzbekistan is compounding the economic effects of the COVID-19 pandemic, which had already spurred protectionist economic policy and threatened the reform agenda in Uzbekistan. This new crisis might convince policymakers to impose trade restrictions, price controls and rollback reforms.

Since 2016, bold market reforms have enabled Uzbekistan to unlock higher rates of economic growth. But public sector entities will likely seek further subsidies and preferential schemes from the state, attributing their inefficiency to yet another economic shock. This could further entrench rentierism in an economy that has been taking important strides towards fiscal discipline, privatisation and the targeting of fiscal spending towards private sector businesses and households.

To emerge from the new economic crisis, Uzbekistan must double down on its reform agenda. Policy interventions might be necessary to support businesses given the scale of the economic crisis. But these interventions should be targeted and limited to avoid hobbling reforms. Instead of providing carte blanche support for inefficient businesses—raising the government debt burden—Uzbekistan should condition state aid in ways that support reforms, especially those reforms seeking to reduce state dominance of the economy.

The Uzbek government continues to provide preferential loans, subsidies for economic operators and preferential tax regimes in ways that favour state-owned enterprises and politically-connected firms. Economic resources flow from taxpayers to these firms, while households and small and medium-sized enterprises remain vulnerable to economic headwinds. The country’s privatisation plan, a largely untapped source of government revenue, risks being further delayed as state-owned enterprises cite the crisis as a reason to slow critical reforms. The speed and transparency of privatisation auctions should be increased.

The stalled land reform must also be advanced. Agriculture accounts for 28 per cent of the Uzbek economy and employs the same proportion of the labour force. The government should expand property rights reform cover to all types of land, including agricultural land, which would boost private investment and production of food staples now subject to rising prices. This reform could also soften the blow of lower remittances, as repatriated labour migrants could earn their livelihoods as smallholder farmers or agricultural labourers.

In the case of Uzbekistan, a country in which expansive price controls have historically distorted incentives, the temptation to introduce price ceilings should be avoided. Higher prices will encourage producers to increase supply—increased investment by private producers will boost employment and eventually stabilise prices.

The government should continue to prioritise inclusive development by focusing on poverty reduction. Uzbekistan has made progress in measuring poverty. Uzbek President Shavkat Mirziyoyev has acknowledged that 12–15 per cent of the population is living below the poverty line and created specialised registries to capture unemployed youth, vulnerable women and people with disabilities.

Such approaches have also underpinned the rollout of programs targeted at the community level. Some initiatives, such as the free school meals and conditional cash transfers for the purchase of agricultural equipment or livestock, will likely produce mixed results due to distorted incentives. Other community-based initiatives, such as cash transfers for families dependent on labour migrants, record educational subsidies, incentives to hire women and mass health screenings, are more promising.

But citizens are not merely a target for support during periods of economic crisis—they are also a source of economic resilience. The government should continue to engage communities to better target fiscal interventions during the crisis. Uzbekistan’s timely Open Budget initiative gathered 6.7 million votes and offers a powerful platform for local communities to voice their needs in the pursuit of a more efficient allocation of state resources.

Easing the registration and operation of NGOs will result in the broader empowerment of vulnerable populations and better distribution of state aid. This may improve trust in the state institutions by ensuring that a larger portion of aid reaches the intended audiences.

The government needs to carefully delimit policy interventions so as not to derail the broader reform agenda that requires Uzbekistan to move away from excessive state intervention in the banking sector. For a short period, the Central Bank of Uzbekistan instituted recommended exchange rates for the Russian rouble that were effectively compulsory and below market rates. Over 80 per cent of Uzbekistan’s banking sector being state-owned is especially concerning at a time when policymakers are under pressure to expand financial support to banks.

Given the new economic reality, Uzbekistan should prioritise its talks on WTO membership and actively pursue new trade partnerships. To incentivise both local producers and foreign suppliers to continue to meet the needs of Uzbek consumers, fostering free markets is vital. Uzbek policymakers should resist the temptation to revert to the orthodoxies of the planned economy as they devise their crisis response—the best way out of the crisis is to look forward, not back.

Photo: Kremlin.ru

Iranian Garbage Can Found as U.S. Embassy in Baghdad Stormed

One day after a deadly US airstrike which killed 25 militiamen, members of several Iraqi paramilitary groups aligned with Iran marched on the U.S. embassy in Baghdad, breaching the outer wall of the compound, which is set behind multiple checkpoints in the heavily guarded Green Zone. 

Facing no resistance from Iraq’s security forces, the protestors moved on the embassy, risking further escalation between the United States and Iran days after the death of an American contractor in a rocket attack linked to the Kataib Hezbollah militia. U.S. President Donald Trump warned in a tweet that Iran would “be held fully responsible” for the attack on the U.S. embassy, although he later told reporters that he did not expect a war.

The day’s events produced many surreal scenes, but perhaps none more so than that captured in a video shared widely on social media. The short clip shows a green plastic garbage can, which protestors had recognized as an Iranian-made product. Several men can be heard laughing as they remark on the irony of finding an Iranian garbage can in use behind the walls of the U.S. embassy.

Iraqi protesters inside the US Embassy grounds in Baghdad laugh hysterically about the embassy using an Iranian-made garbage bin.pic.twitter.com/ETrHjrXGlX

— Séamus Malekafzali (@Seamus_Malek) December 31, 2019

The otherwise unremarkable garbage can may offer a metaphor for the senseless contest between the United States and Iran for political and military influence in Iraq. The fact that the U.S. embassy is using Iranian garbage cans serves as a reminder that basic economic logic can still override the competition that has so frustrated the Iraqi people by stymying development and stoking violence.

A logo visible in the video, written in Persian, indicates the garbage can was manufactured by Razak Chemie. The company, also known as Razak Plast, specializes in the production of plastic garbage cans and dumpsters. Based in Tehran, Razak Chemie, exports to a wide range of markets, including Iraq. It is part of Iran’s large and well-developed manufacturing base, which converts the country’s natural resources—in this case the petrochemical derivatives of oil production—into higher value finished goods.

It is likely that the contractor responsible for sanitation services at the U.S. embassy compound purchased the garbage can from a local wholesaler—perhaps even a local subsidiary of Razak Chemie. A product like a garbage can is exempt from sectoral sanctions on Iran, and Razak Chemie is not a sanctioned entity. It may not have occurred to anyone to check the origin of the garbage can—certainly no one would have anticipated the garbage can would feature in a video shot by Kataib Hezbollah members behind the embassy walls.

Economically speaking, it makes perfect sense that the U.S. embassy in Baghdad would use Iranian garbage cans, potentially in addition to other Iranian products. As one of Iraq’s largest trading partners and—along with Turkey—the neighbor with the largest manufacturing base, Iran is an obvious supplier for a wide range of consumer and industrial goods.

Sure, the contractor at the U.S. embassy could have sourced the same kind of garbage cans from China. But it is likely that Razak Chemie’s products were simply more affordable and more readily available than those from other companies and countries.

A Chinese-made garbage can sold in Iraq would have traveled a long way. It would also have been produced with plastic pellets imported from abroad—very possibly from Iran itself. Between January and November 2019, China imported USD 2.3 billion of plastics from Iran, a category which includes the raw materials necessary for injection molding of industrial garbage cans. Given Razak Chemie can source key raw materials domestically and can get its products to Baghdad via a simple 11-hour journey by truck, cost-competitiveness is to be expected.

A similar business case applies to a wide range of Iranian manufactured goods now exported to Iraq. Last year, Iran-Iraq bilateral trade amounted to USD 12 billion. When Iranian President Hassan Rouhani visited Baghdad in April 2019, he announced an ambitious goal to grow that figure to USD 20 billion by 2021. By comparison, in 2018, U.S.-Iraq bilateral trade was just over USD 13 billion. However, of that amount nearly USD 12 billion was exports of Iraqi crude oil to the United States. In short, the U.S. is not selling basic products like garbage cans to Iraq—and those products, when not manufactured domestically in Iraq, are frequently sourced from Iran over other global suppliers.

Whatever vision policymakers in Washington may have for economic development in Iraq, it will require the respect for Iraq’s deep economic ties with Iran and the utility of those ties. Of course, in the interests of Iraq’s economic sovereignty and development, these ties ought to be based on fair competition and comparative advantages. Ideally, more of Iraq’s consumables will one day be made domestically, but perhaps it will be through joint ventures in which an experienced firms like Razak invest in Iraqi manufacturing. Already, several major Iranian companies have established local manufacturing plants in Iraq, contributing much-needed foreign direct investment and transferring technological knowhow while also creating jobs.

Iran-backed militias may have made it behind the walls of the U.S. embassy, but Razak Chemie’s garbage can made it there first—unthreateningly and usefully. The United States can no more expect to excise Iranian commercial activity from the Iraqi economy than it can expect to end German commercial activity in Poland—economic development necessitates regional integration.

Photo: Razak Plast