A correspondent for PBS' Frontine,
writing from Tehran (7/19/12) talks about businesses there in his piece entitled: "Feeling
the Pinch: Iran's Embattled Importers":
Seated behind a large wood-paneled desk
in downtown Tehran, Mohammed irritably folds up his newspaper and
asks the office tea boy to fetch him a glass of iced water. Removing
his gold-rimmed glasses, he drops his head in his hands.
It is a day after the long-anticipated
E.U. sanctions banning European refineries from importing Iranian oil
went into effect. A headline screams: "Iran Will Confront
Sanctions with Foreign Capital Reserves." The governor of the
Central Bank of Iran has declared that the country has $150 billion
in foreign currency reserves, enough to weather the storm until an
economic plan is enacted.
"They are lying," Mohammed
says. "They don't have enough foreign currency to cover the
country's imports."
Mohammed owns a company that imports
base chemicals to supply Iran's plastic industry. His office walls
are adorned with colorful jars containing the resins and liquids that
he previously imported from Europe, but which now -- following
successive rounds of sanctions -- are sourced from China, Malaysia,
and Turkey. The sanctions are designed to force the country's
clerical rulers to make concessions on their nuclear program, which
Iran maintains is for peaceful purposes. The most biting set of
sanctions, enforced since last December 31, bars foreign companies
that do business with the Central Bank of Iran from the U.S.
financial system.
"It gets worse and worse every
day," Mohammed explains. "Before the sanctions it took two
days to get an import permit from the Ministry of Commerce or a
letter of credit from the Iranian bank that pays the exporter.
"Now it takes two weeks for the
import permit and 15-20 days for the letter. Customs is blocked up
too. Last week we had a shipment that was held at Bandar Abbas for
two months!" he said, referring to Iran's largest port.
These delays evidence a dry-up of
foreign currency in Iran, caused by a drop in the oil exports that
make up between 50 and 65 percent of all government revenue. This
month, the volume of oil exports fell to third place in OPEC,
slipping below Iraq for first time since 1989, just after the
Iran-Iraq War.
Experts estimate that Iran's oil
exports are down 35 percent compared with the beginning of the year,
costing the country roughly $10 billion so far in lost revenue.
The remaining buyers of Iranian crude
struggle to send their petrodollars to Iran due to a lack of banks
that handle Iranian trade, creating a dearth in the foreign currency
that is much needed by the country's importers. Until this past week,
India was buying oil with grain and requiring Iran to deliver the
crude to circumvent a ban on E.U. insurers providing coverage to
Iran-bound tankers.
"It becomes easier and harder to
buy dollars and euros depending on how the government's reserves
look," says Mohammed. "Iran often takes payment for its oil
from China by using IranAir planes to bring back vacuumed-packed
bundles of dollars."
Mohammed is particularly bitter about
what he sees as the free ride for Iran's government-affiliated firms,
mostly linked to the Islamic Revolutionary Guard Corps. Labeled by
many as "a state within a state," the Guards control a vast
business empire estimated at around 30 percent of Iran's GDP,
spanning construction to online shopping. This has attracted the ire
of the many businesses outside what are seen as cosy
government-protected circles, beset by patronage and nepotism.
"The sanctions only affect private
businesses. Sepah [the Revolutionary Guards] are close to the banks
so they can get all the cheap dollars they like and import whatever
they like without permits. We can't compete."
Following the reports of "crippling"
new U.S. sanctions at the end of last year, the Iranian rial crashed
against the dollar, prompting the government to ban foreign exchange
at the market rate and freeze the official rate at 12,260 rials per
dollar. Individuals and businesses purchase illicit dollars at
exchange shops that still trade at the market rate, which has run 20
to 65 percent above the government rate over the past six months.
Though it is technically illegal -- and
potentially punishable by death -- companies buy foreign cash on the
spot market because it saves them from supplying cheap dollars to
importers who often now need to pay upfront in cash; the government
tends to turn a blind eye.
The exchange shops are providing a
lucrative but essential service to Iran's embattled importers.
Through connections in the UAE and Turkey, they are flush with
foreign cash and even the financial contacts to pay international
suppliers, who then send cargos directly to Iran.
Years of having artificially inflated
its currency has made Iran very reliant on imports, but inflation,
which officially stands at 22 percent -- though this is widely
perceived as an underestimate -- is ringing a death knell for Iran's
small manufacturing base. Several factories have shut down or cut
their hours.
Javad, a stationery business owner, has
also been hit by the economic downturn. The currency crash coupled
with rampant inflation has doubled the cost of imported paper since
2011. Javad can't pass on the costs, so he is sitting on around
$35,000 of unsold stock, hoping that the beginning of the school year
in September will change his fortunes.
"Companies close to the government
get priority on the dollars at the government rate and they exploit
their positions," he says.
Referring to the culture of speculation
that has emerged from the wide gap between the government and market
exchange rates, Javad says, "Government companies buy
government-rate dollars like they are importing something, but then
they just bring them back to the country and sell them. It's big
business."
Javad's wife, Fatimah, a freelance
lawyer, is sustaining him through the hard times. The economic gloom
has prompted a growing number of divorces and small-claims disputes,
making her law practice busier than ever, he says.
"Last year, my fruit and vegetable
shopping cost about 10,000 tomans; this year, it's 30,000! When
people worry, crime goes up and families break up," says Javad.
Theoretically designed to change the
behavior of the clerical leadership in Iran, the weight of
international sanctions falls onto the shoulders of the Iranian
people. Nowadays, the cost of living is people's main complaint.
Incredulous looks at supermarket tills are commonplace.
A housewife from a working-class
neighborhood in downtown Tehran complains that the price of lamb has
doubled in a year.
"I can't make aab gosht anymore,"
she says, referring to a simple lamb stew that is a Persian staple.
"My family eats bread and beans."
Copyright © 2012 Tehran Bureau
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