Soleimani Killed, Pandemic Declared, Oil Crashes: The Most Consequential Quarter in a Generation Arrives

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 April 2020 | Reporting Period: 3 January – 2 April 2020

Quarterly Briefing

• The United States kills Iranian General Qasem Soleimani in a drone strike in Baghdad on January 3; Iran retaliates with missile strikes on US bases in Iraq.
• COVID-19, first identified in Wuhan, China in late 2019, spreads globally; the WHO declares a pandemic on March 11.
• A Saudi-Russian oil price war erupts in March after OPEC+ talks collapse; Brent crude falls below $25 per barrel.
• Caribbean tourism shuts down as borders close across the region; Jamaica suspends international commercial flights in late March.
• Iran accidentally shoots down Ukraine International Airlines Flight 752 on January 8, killing all 176 on board, after mistaking it for a missile.
• Jamaica’s government enacts emergency COVID measures; the National Housing Trust suspends normal operations as the economy enters freefall.

Prologue: Three Months That Changed Everything

The first quarter of 2020 will be recorded in history as one of the most consequential three-month periods of the twenty-first century. It opened with an American missile killing the most powerful military commander in the Middle East and triggering a crisis that briefly appeared capable of becoming a major regional war. It ended with the entire global economy in partial shutdown, international aviation near-paralysed, and Caribbean tourism — the foundation of Jamaica’s economic model — closed by government decree. In between, a novel coronavirus first identified in a Chinese city moved with extraordinary speed to every inhabited continent, overwhelming health systems that had been preparing for exactly this kind of pandemic threat for years without adequate preparation. As this edition is published on 3 April 2020, the world is in its fourth week of pandemic emergency and nobody knows how long it will last.

Soleimani’s Killing and the Near-War with Iran

In the early hours of 3 January 2020 — the very day this review’s reporting period begins — a US Reaper drone fired missiles at a convoy leaving Baghdad International Airport, killing Major General Qasem Soleimani, the commander of Iran’s Quds Force and one of the most powerful military figures in the Middle East. Soleimani had directed Iranian proxy operations across Iraq, Syria, Lebanon and Yemen for decades; he was regarded by US and Israeli intelligence as the architect of Iranian influence across the region and as personally responsible for the deaths of hundreds of American soldiers through proxy attacks. His killing was ordered by President Trump following a series of escalating incidents, including an attack on the US embassy in Baghdad.

Iran’s response was swift. On 8 January, Iran launched more than a dozen ballistic missiles at two US military bases in Iraq — Al-Asad Air Base and Erbil International Airport. The strikes were announced in advance through diplomatic channels, apparently to allow evacuation and reduce casualties. No American soldiers were killed in the direct strikes, though dozens suffered traumatic brain injuries. Hours after the launch, Iran’s air defences accidentally shot down Ukraine International Airlines Flight 752, a Boeing 737-800 carrying 176 passengers and crew — mostly Iranian-Canadians — shortly after takeoff from Tehran, having mistaken it for an incoming missile. All aboard were killed. Iran initially denied responsibility before acknowledging the error days later under pressure from Canadian and Ukrainian governments.

For Caribbean energy markets, the Soleimani crisis was the year’s first major geopolitical shock: Brent crude oil spiked above $70 per barrel on news of the killing and the threat of a broader Iran-US conflict. The spike moderated within days as it became clear that neither side wanted full-scale war, but the episode reinforced how quickly Middle Eastern tensions translate into energy price volatility that reaches Caribbean fuel import budgets. The underlying US-Iran tensions — centred on Iran’s nuclear programme and proxy wars — remained unresolved and continue to provide a chronic risk premium in energy markets.

COVID-19: From Wuhan to Global Pandemic

A novel coronavirus — SARS-CoV-2 — had been identified in Wuhan, China’s Hubei Province in late December 2019. By January 2020, China had reported hundreds of cases and acknowledged human-to-human transmission. The WHO declared a Public Health Emergency of International Concern on 30 January. Through February, the virus spread to South Korea, Italy, Iran and dozens of other countries, with Italy’s outbreak the first to overwhelm a European healthcare system. On 11 March, with cases confirmed in more than 100 countries, the WHO declared COVID-19 a pandemic.

The world’s economic response was without historical precedent. Governments imposed lockdowns covering billions of people. International aviation essentially ceased: the International Air Transport Association estimated global passenger traffic would fall by 38 per cent for the full year 2020, with the collapse concentrated in the second quarter. Stock markets experienced their fastest descent into bear market territory in history — the US market fell 34 per cent from its February peak in just 33 days. Central banks and governments announced emergency support programmes totalling trillions of dollars.

For Jamaica and the Caribbean, COVID-19’s pandemic declaration was an existential economic threat. Tourism accounts for approximately 10 per cent of Jamaica’s GDP directly and a significantly larger share when indirect effects are included. With air travel suspended and borders closing, the entire tourism economy — hotels, resorts, ground operators, restaurants, craft markets and the informal economy dependent on visitor spending — effectively stopped. Jamaica suspended international commercial flights on 23 March and imposed curfew measures under the Disaster Risk Management Act. The economic impact was immediate and severe.

The Oil Price War

As if COVID’s demand destruction of oil markets were not severe enough, a simultaneous supply shock arrived in March when OPEC+ talks collapsed. Saudi Arabia and Russia failed to agree on production cuts to stabilise prices in the face of COVID-driven demand collapse; in response, Saudi Arabia announced it would dramatically increase production and offered steep discounts to buyers. Russia similarly declined to cut. The resulting supply flood pushed Brent crude from approximately $50 per barrel in late February to below $25 by late March — a fall of more than 50 per cent in four weeks.

For Caribbean oil importers, the oil price crash provided an immediate theoretical benefit — cheaper fuel at a time when budgets were under severe strain. But the benefit was largely notional: with tourism collapsed and economic activity largely stopped, there were fewer vehicles, aircraft and industrial operations to benefit from lower fuel prices. The oil crash also devastated the PETROCARIBE arrangement’s remaining viability: Venezuela, whose oil revenues underpinned the programme, was seeing its already-depleted production made even less commercially viable by prices at which it cost more to pump the oil than it was worth.

Haiti’s Compounding Crisis

Haiti entered 2020 in its second year of acute political crisis following the Petrocaribe corruption scandal protests and President Moïse’s refusal to resign. The country’s parliament had expired in January 2020 without elections being held, leaving Moïse governing by decree without legislative oversight. Prime Minister Joseph Jouthe took office in March. COVID-19 arrived in a country with essentially no functioning public health infrastructure, severely limited testing capacity and a population whose crowded urban living conditions made social distancing nearly impossible. CARICOM expressed deep concern about Haiti’s ability to manage the pandemic and pressed for international support.

Jamaica: Facing an Unprecedented Crisis

Jamaica’s government enacted emergency measures with unusual speed as COVID-19’s pandemic threat became clear. The Disaster Risk Management Act provided the legal framework for curfews and movement restrictions. The National Housing Trust announced mortgage relief provisions for members who had lost employment. The government established a CARE programme providing targeted cash transfers to vulnerable households and displaced workers. The Bank of Jamaica cut its policy rate to provide monetary accommodation to the economy, reversing the tightening cycle it had maintained through 2019. Emergency budget revisions were underway to account for the collapse in tourism-related tax revenues.

The housing and real estate market, which had been performing strongly through 2019, was effectively suspended in the lockdown period. Site visits, sales offices, new mortgage applications and developer launches all slowed dramatically. The sector’s underlying demand — driven by a structural housing deficit, diaspora purchasing and a young population with housing aspirations — had not evaporated, but its expression was deferred. The question was how long the deferral would last and whether the financial capacity of potential buyers would survive the economic shock.

Looking Ahead

As this edition is published on 3 April 2020, the COVID-19 pandemic is at an early and uncertain stage. Nobody knows whether the virus will be contained in weeks or persist for years; whether effective treatments or vaccines are months or years away; or how much permanent economic damage the shutdown will produce. What is clear is that Jamaica’s economy faces a crisis of unprecedented severity and uncertain duration, that the geopolitical environment — US-Iran tensions unresolved, oil markets collapsed, global institutions strained to their limits — provides no cushion, and that the resilience built through a decade of fiscal consolidation will be severely tested. The world that existed in January 2020 will not simply resume when the pandemic passes. Something different will have to be built from what remains.

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Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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