The socioeconomic cost of Iran’s hegemony

Over the last decades, Iran’s expanding influence in the Middle East has helped the country boost its geopolitical relevance. It is trying to protect itself against real and perceived foes, but the buffer states controlled by Tehran have greatly suffered from this state of affairs.

Malnourished child in Yemen Iran’s influence
A malnourished Yemeni child receives treatment at the Al-Sabeen hospital on August 10, 2021, in Sanaa. The Iran-backed Houthi insurgency has led to a protracted humanitarian crisis, and the UN estimates that 24.3 million people are at risk of hunger. © Getty Images

In a nutshell

  • Iran wants to control surrounding countries to protect itself
  • It has gradually wreaked havoc in its Arab “colonies”
  • Some populations are protesting against Iranian intervention

Iran’s hegemony in Iraq, Lebanon, Syria and Yemen has significantly contributed to economic and social decline. Over the last decades, the four Arab countries went through great difficulties that were not caused by Iran. But since the early 21st century, Tehran bears responsibility for much of the hardship that has befallen the four states. 

It is widely assumed that Iran’s expansionist strategy is motivated solely by ambitions for hegemony. While this is certainly part of the explanation, it is by no means the whole picture. As the ruling elite of the Islamic Republic sees it, defense is at least as powerful a motive. The regime is severely paranoid when it comes to security. They believe that Iran is surrounded by enemies, not to mention distant foes like the United States, who threaten its very existence. Their answer to those perceived threats is massive defensive expansionism. 

For Tehran, controlling Iraq, Lebanon, Syria, and Yemen is not merely an imperialist, and in Syria also colonial indulgence that can be renounced if it proves to be too costly. (This was the case with Britain in India, then Palestine, and a few years later France in Algeria.) The Iran of the ayatollahs sees all four countries as indispensable for the regime’s very existence, as well as the country’s independence.


Facts & figures

Map of Iran in the Middle East Iran’s influence
Of all its “colonies,” Iran see Iraq as the topmost priority, especially since it provides a land bridge to Syria and Lebanon and serves as a cash cow. © macpixxel for GIS

Zone of influence


Of all its four colonies, Iraq is the highest priority for Iran. Tehran sees it as a Twelver Shia buffer zone against the Sunni-majority Arab world and, to an extent, against Sunni Turkey. In addition, Iraq is a crucial land bridge to Syria, Lebanon and, in the future, Jordan. While dominating the other three is costing Iran much money and blood, Iraq serves as a cash cow. 

Iran believes exploiting its smaller and weaker Shia sister is legitimate. The Iraqis are Arab, and historically the Persians saw themselves as superior. And the mullahs’ regime does not hesitate to oppress even its own people.

Controlling the Bab-el-Mandeb Strait is of the highest strategic value for Tehran.

Syria and Lebanon

Iran needs to control both Syria and Lebanon for three reasons: as gateways to the Mediterranean, as an extended shield against Turkey and Israel, and as a launching pad for rockets and missiles into Israel. For Tehran, access to the Mediterranean is of great importance to secure outlets to North Africa and Europe. 

Although the Alawites are a Shia offshoot, the sect of Syrian President Bashar al-Assad is not Shia, and his Ba’th regime is the most secular in the Muslim-majority Arab world. Still, since Ayatollah Khomeini came to power in 1979, the Tehran-Damascus axis is holding fast. For President Assad, Iran is a critical source of military and financial support. 

In Lebanon, protecting the Twelver Shia community is of great value in domestic Iranian politics but, more importantly, the Lebanese Twelvers are proving to be willing proxies. Through them, Tehran can control Lebanon easily even though not exactly cheaply, and harass Israel at no risk to itself.


Facts & figures

Twelver Shi'ism

The Twelver sect accounts for 85% of all Shia Muslims. Its name refers to its followers’ belief in the doctrines of the Twelve Imams, considered spiritual successors to the prophet Muhammad. Twelvers make up a majority of the population in Azerbaijan, Iraq and Iran, but only Iran has adopted Twelver Shi’ism as the state religion.


The Houthis of north Yemen belong to the Zaidiyyah Islamic sect (the so-called Fiver Shia) and, as such, they are not close to the Twelver Shi’ism of Iran. But controlling the Bab-el-Mandeb Strait is of the highest strategic value for Tehran. With the Strait of Hormuz, which Iran has been controlling since 1971, it is one of the most strategically important locations in the Middle East. Bab el-Mandeb gives access to the Red Sea and, from there, to Eilat and the Suez Canal and the Mediterranean. The Strait of Hormuz is the gateway from the Persian Gulf into the Indian Ocean. The ability to block or threaten either is a key advantage.

Indicators of distress

The simplest way to gauge the damage inflicted by Tehran to these four countries is to compare them to states with similar economies that are out of Iran’s reach. 

Syria, Lebanon and Yemen should be compared to states with no significant oil revenues. Iraq is the second-largest oil producer in OPEC, but it does not fit neatly into the category of oil-rich states. It has a large population of 40 million (10 million more than Saudi Arabia) and it went through two armed conflicts, an embargo, an occupation and a civil war. Still, by 2010 Iraq produced around 2.5 million barrels of oil per day and has continued to increase its production since then. Its oil revenues in 2020, an exceptionally bad year, were $42 billion. In pre-Covid years it was twice as high ($87 billion in 2019). Revenues between 2010 and 2020 should have guaranteed rapid development and reconstruction, but this has failed to materialize.

Per capita GDP

In 2019 and 2020, Iraq’s gross domestic product (GDP) per capita (PPP) hovered between $10,000 and $11,000. A comparison with Egypt, a country that went through massive convulsions during the Arab Spring, with a population of over 100 million and no oil revenues to speak of, but which is out of Iran’s reach, is instructive. By 2019, Egypt had a GDP of $11,800 per capita. In the same year, Jordan, another country without oil but with a crippling water problem, reached just over $10,000 GDP per capita. For Iraq and Egypt to boast similar GDP per capita is mind-boggling. In Lebanon, despite the ascending military, economic and political clout of Hezbollah, in 2017 and 2018 the GDP per capita was low, but still around $16,000. It began to decline in 2019, reaching $12,300 in 2020. 

The CIA’s last assessment for Syria’s GDP per capita is from 2015, estimated at $2,900. According to the IMF, in 2021, after six more years of war, it was $6,400. This looks far too high. The World Bank has not provided any assessment for Syria during the last decade. This author’s assessment is that, for half the nation who lived under President Assad’s control, by 2020 the GDP per capita was between $1,000 and $2,000.

As for Yemen, according to the World Bank’s most recent statistics, by 2013, two years before the civil war, it was $3,700. The IMF assessed the GDP per capita in 2021 to be $1,900. This, too, looks far too high, and it likely does not apply to the Houthi-ruled north. Again, this author’s assessment is that real figures are much lower, probably less than $1,000 by 2021 on average for the whole country. As of this year, along with Somalia, Syria and Yemen are the Arab countries with the lowest GDP per capita.

In Yemen, accounts of daily life transcend dry GDP figures. In March 2021, the World Bank stated:

“For years the poorest country in the Middle East and North Africa, it is now [after the 2015 eruption of the civil war] also suffering the worst humanitarian crisis in the world. Fighting has devastated its economy – leading to food insecurity verging on famine – and destroyed critical infrastructure. The UN has estimated that 24.3 million people [out of a population of 29 million] in 2020 were ‘at risk’ of hunger and disease, of whom roughly 14.4 million were in acute need of assistance. … Some 20.5 million Yemenis are without safe water and sanitation and 19.9 million without adequate healthcare. As a result, over the past few years, Yemen has been grappling with mass outbreaks of preventable diseases, such as cholera, diphtheria, measles, and Dengue Fever. Waves of currency depreciations in 2018 and 2019 have created lasting inflationary pressure on the Yemeni riyal that has exacerbated the humanitarian crisis. … Poverty is worsening; whereas before the crisis it affected almost half of Yemen’s total population … now it affects an estimated three-quarters of it.”


According to the 2020 Corruption Perception Index, when comparing Iraq, Syria, Lebanon and Yemen to Egypt and Jordan, the same depressing picture emerges. Jordan is 60 out of 179, and Egypt is 117. Lebanon, a historical hub of successful local and international entrepreneurs, is 149, Iraq 160, Yemen 176 and Syria 178, just one rank above rock-bottom Somalia and South Sudan. 

The same goes with the 2019 Ease of Doing Business Index. Out of 190 countries, Jordan is 75, Egypt 114, Lebanon 143, Iraq 172, Syria 176, and Yemen 187. No wonder few foreign or domestic entrepreneurs are ready to risk investing. The private sector is declining, and the burden of development lies almost exclusively on the government’s shoulders. But since the authorities are thoroughly corrupt, most revenue disappears into officials’ personal coffers.

The daily life of the average Lebanese has been disrupted far more profoundly than what statistics can show.


Some criteria show certain Iranian “colonies” struggling while others fare better. Debt is one of them. Iraq’s debt-to-GDP ratio is not threatening to its economy. By December 2020, it was 68.3 percent, better than Egypt’s (90 percent), Jordan’s (92.4 percent) and even the eurozone (98 percent). In Lebanon, the debt-to-GDP ratio reached 174 percent in 2019, the second-highest in the world. In 2020 it was 172 percent, the fifth global highest. On March 9, 2020, Beirut failed to repay a $1.2 billion Eurobond. There had never been a sovereign default in the country’s history before, even during its devastating civil war (1975-1990). Yemen’s debt-to-GDP ratio in 2019 is reported to be reasonable (76.5 percent), but it apparently applies only to the internationally recognized, Saudi-sponsored regime ruling the south. This author is not aware of any meaningful international loans to the Houthi north. Syria’s debt-to-GDP ratio is not known.


Inflation is another area where Iraq kept its head above water. Since 2008 inflation rate has been between 0.6 percent to 2.7 percent. There are no reports of a meaningful dollar-dinar black market. In 2021, inflation suddenly rose, reaching 9.4 percent as the dinar was officially devalued, but the forecast is that it will gradually fall again. When it comes to debt-to-GDP ratio and inflation, massive oil revenues help.

Between 1999 and 2019, inflation in Lebanon was well under control. Except for 2008, when it reached 11 percent, it did not exceed 5 percent, and mostly stayed much lower. However, in 2020 it soared to 88 percent. From January to May 2021, it was growing on average by 6.5 percent every month, then 10 percent in May and rising. Between October 2020 and July 2021, the Lebanese pound lost 90 percent of its value. Prices in some sectors rose even faster. Food prices especially rocketed by almost 400 percent in 2020. 

Queue at a gas station in Lebanon Iran’s influence
The Lebanese pound lost 90 percent of its value over the past year, leaving the population struggling to obtain essential goods like gasoline. © Getty Images

In Syria, before the civil war in 2010, the official exchange rate was 47 Syrian pounds to the U.S. dollar. The black market rate was only slightly higher. In March 2020, the black market rate was 700 pounds to the dollar and by March 2021, it had reached 4,250 pounds. In January 2021, a new 5,000-pound bill went into circulation, following the introduction of a 2,000-pound bill in 2017. 

In Yemen, with two exceptions in 2008 and 2011, between 2000 and 2014 inflation fluctuated between 5 percent and 12 percent annually. This is very high. However, in 2015, when the civil war erupted, it soared to 22 percent. From then onward, it hovered between 26 percent and 31 percent.

Popular reactions

How are local populations coping with the realities reflected by these economic indicators? Syria and Yemen are still in the throes of bloody civil wars. Some small food riots in Damascus and the Alawite mountains notwithstanding, mass demonstrations under Bashar al-Assad will be gunned down. They are a luxury no one there can afford. 

The daily life of the average Lebanese has been disrupted far more profoundly than what statistics can show. Food prices have become exorbitant and some basic items like bread have become difficult to obtain. Scores of cars queue for gasoline near each station, occasionally resulting in shooting battles. Electricity has been scarce and intermittent, and demonstrations including arson have become widespread in Beirut and Tripoli in the north. Large antigovernment and anti-Hezbollah demonstrations erupted on October 17, 2019, after new taxes were instated. The youth began with protesting taxation through WhatsApp. But very quickly the masses also rose against unemployment (which had reached 46 percent already in 2018), endemic corruption in the public sector, legislation shielding the ruling class, and the government’s failure to provide basic services like electricity, water and sanitation. Many also protested Iran’s interventions in Lebanese affairs.

Protests continued throughout the pandemic and well into the summer of 2021.

In Iraq, mass antigovernment and anti-Iranian demonstrations erupted in July 2018 and died out by November. Also, the Iraqi Shia south, dependent on Iranian electricity, saw its power cut off mid-summer. This left people without air conditioning and dangerously reduced safe drinking water supplies and led to thousands of hospitalizations every day. Demonstrating masses shouted, “Iran out!” and torched the Iranian consulate in Basra, together with the offices of a few political parties. 

Antigovernment and anti-Iranian protests erupted again in Baghdad and the south in October 2019. Despite assassinations and “disappearances” of popular leaders, protests continued throughout the pandemic, well into the summer of 2021.

There is no denying that all the Arab countries under Iranian influence are now in trouble. Iran’s role in the region’s problems will be further discussed in an article to follow soon.

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