Iranian unrest grows over economic woes
By Barbara Slavin
WASHINGTON - Last year's Iranian political demonstrations have given way to
economic protests that could prove more worrisome for the Tehran government.
The unrest includes the first prolonged strike in the Tehran bazaar and
protests by industrial workers who have gone unpaid for months.
While these incidents are not directly related to the latest round of United
Nations, United States and European penalties against Iran - and do not appear
to have been coordinated with the
opposition Green movement - the new sanctions contribute to a climate of
uncertainty that is undermining the Iranian economy and rattling Iran's
leaders.
"Sanctions could be the proverbial straw," says Djavad Salehi-Isfahani, a
professor of economics at Virginia Tech who is on sabbatical this year at the
Belfer Center at Harvard's Kennedy School of Government. "These little things
can suddenly coalesce."
Salehi attributed Iran's economic woes primarily to the drop in oil prices and
to Iranian government policies: over-stimulating the economy when oil prices
were high and then cutting back on spending to reduce double-digit inflation.
Inflation is now down to about 9.4%, but unemployment is officially 14% overall
and close to 30% for young people, Salehi said.
While wealthy Iranians are still spending freely in the cappuccino bars of
north Tehran, they are not hiring new workers or investing.
"There is a real credit squeeze," says George Lopez, a Jennings Randolph senior
fellow at the US Institute of Peace and an expert on the use of economic
sanctions. "There is an air of conservatism, caution and even a bit of panic."
A strike that began on July 6 among gold and fabric traders in the main Tehran
bazaar continued this week despite a government pledge to scale back a planned
70% increase in taxes to 15%.
Strikes in the bazaar were a major factor in the 1978-79 revolution; bazaars
remain an important constituency in Iran although they have been overshadowed
in the economy by the Islamic Revolutionary Guards Corps.
Meanwhile, industrial workers are increasingly restive. According to the Iran
Labor Report, an Internet publication of Iranian labor activists, 180 workers
at the Alborz china company in the northwestern city of Qazvin staged a
demonstration July 6, complaining that they had been paid only twice in the
past 12 months. They had previously protested on May 1.
Kevan Harris, a sociologist at Johns Hopkins University who frequently travels
to Iran, noted that the head of a government-run trade union in the northern
city of Tabriz complained recently that workers there had "reported not
receiving wages on time, receiving below the minimum wage, no payment of
overtime, being cut out of government sponsored entitlements such as food
vouchers, and moving towards temporary contract labor."
Iranian entities are not only suffering from a lack of investment. They must
pay more for a range of imported materials, including refined petroleum
products.
Iran, which imports about 30% of its gasoline, appears to have found Turkish,
Chinese and Iraqi Kurdish substitutes for European suppliers. Most major
European oil companies have stopped selling to Iran to avoid falling afoul of a
new US law that threatens to block firms that do business with Iran's energy
sector from access to the US banking system.
Iran is also having problems selling its crude and is increasingly resorting to
discounts and shady middlemen, according to a Tehran-datelined story for the
Institute for War and Peace Reporting.
United States and European sanctions on Iranian banks in effect for several
years have raised the cost of most imports by about 20%, according to Western
diplomats. Harris said it is "too soon to tell" whether the latest round "will
add to that bill in any substantial manner".
He said it was also premature to say whether the embattled leaders of the Green
movement - Mir Hossein Mousavi and Mehdi Karroubi - would be able to capitalize
on Iran's economic problems. The movement, born in the aftermath of Iran's
disputed presidential elections last year, has focused on political and civil
rights.
A major test is likely to come when the government phases out subsidies of
consumer staples and replaces them with cash payments. The subsidy reform,
already postponed several times, is now due to be implemented in late
September.
Salehi said initial plans to give more money to Iran's poor had been scrapped
in favor of equal payments to all Iranians because the government lacks the
bureaucratic capacity to carry out more sophisticated income redistribution.
"The one positive thing [from the Iranian government's point of view] is the
realization that this is a complex economy," Salehi said.
It remains unclear whether Iran's mounting economic problems will convince it
to curb its nuclear program - the ostensible rationale for the sanctions. Iran
has expressed interest in new negotiations with the United States but has met
with a skeptical response.
While the Barack Obama administration is congratulating itself over enacting
tough new sanctions, Lopez says, "The danger is that it forgets why it went
after sanctions to begin with."
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