The ongoing American blockade of the Strait of Hormuz is going to cost the Iranian economy around $18 billion annually, Majidreza Hariri, head of the Iran-China Joint Chamber of Commerce, warned the Iranian media site Khabar Online earlier this week.
“We must not get used to the blockade as we did with sanctions,” he told the site. “We should impose the cost of lifting the blockade on the US, even through war.”
Hariri advised that Iran end the blockade by any means necessary, whether through negotiations, threats, or renewing the war, the site reported. His comments came after Iranian President Masoud Pezeshkian reportedly began advocating a strategy to circumvent the naval blockade.
Iran has invested in major infrastructure to increase truck-based trade
Iran has notably invested in major infrastructure to increase truck-based trade, raising the current level of bilateral trade from $3 billion to at least $10b., according to statements made by Iranian Interior Minister Eskandar Momeni last month.
Despite this investment, Hariri said that relying solely on land trade would mean restricting Iran’s import and export capacity to only 20%, and Iran lacks “appropriate relations” to trade with many of its neighbors.
Though not expanded upon, Hariri’s comments likely allude to the fact that Iran has launched attacks on its Gulf neighbors’ critical infrastructure in addition to the United States military infrastructure housed there.
Based on Hariri’s calculation, a container shipped from China to Iran would cost four times as much to transport by land as by sea, reaching an average price of around $12,000. With around two million containers imported annually, and an average additional cost of $9,000, he said this would translate to around $18b. in additional costs for Iranians.
“The worst thing that could happen today is for us to think that we can circumvent the naval blockade and try to run the country despite it,” he said. “We did something similar with the sanctions. Instead of lifting them or finding mechanisms to neutralize them, we turned to circumventing the sanctions, and the result was a weakened economy and major corruption.”
Cost of land transit could mean non-oil experts would no longer be economically viable
Hariri added that the cost of land transit would also mean non-oil exports – which he valued at around $50b. annually – would no longer be economically viable.
“The naval blockade will create fundamental challenges for the country, and if it continues, the country’s economy will grind to a halt. Our total foreign trade is $100b. a year, and adding $20b. in costs to it would bring the entire process to a standstill,” he said.
“Perhaps in the short term, for several weeks or at most a few months, we could use rail and roads to obtain urgent necessities, but this would only work as a necessary measure during a short-term emergency. This is simply about staying alive, but with this approach, the ability to continue operating will be lost.”
He added that the sanctions had already “dramatically increased the costs of our trade, reduced national revenues, and caused the economy to develop an exhausted structure,” and that attempts to circumvent them had led to corruption.
“With the blockade, these developments will occur on a scale several times larger if we convince ourselves that we can circumvent it. We must not allow our economy, or the enemy, to get used to our naval blockade,” he said.
Hariri said that even if it came to “pleading” or renewed war, “this naval blockade must end,” as the consequences of war wouldn’t come close to the economic problems and goods shortages that will result from the continued blockade.
“We must also eliminate the perception in the US that it can resort to such an action whenever it wants, and make it understand that the consequences of such a move could be severe,” he advised.
