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IRAN: Unrest Grows over Economic Woes

Barbara Slavin

WASHINGTON, Jul 13 2010 (IPS) - 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 U.N., U.S. 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 percent, but unemployment is officially 14 percent overall and close to 30 percent 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 U.S. 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 Jul. 6 among gold and fabric traders in the main Tehran bazaar continued this week despite a government pledge to scale back a planned 70 percent increase in taxes to 15 percent.

Strikes in the bazaar were a major factor in the 1978-79 revolution; bazaaris remain an important constituency in Iran although they have been overshadowed in the economy by the Revolutionary Guards.

Meanwhile, industrial workers are increasingly restive. According to the Iran Labor Report, a Web publication of Iranian labour activists, 180 workers at the Alborz china company in the northwestern city of Qazvin staged a demonstration Jul. 6, complaining that they had been paid only twice in the last 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 have “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 labour.”

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 percent 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 U.S. law that threatens to block firms that do business with Iran’s energy sector from access to the U.S. 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.

U.S. and European sanctions on Iranian banks in effect for several years have raised the cost of most imports by about 20 percent, 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 – will be able to capitalise 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 favour 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 realisation that this is a complex economy,” Salehi said.

It remains unclear whether Iran’s mounting economic problems will convince it to curb its nuclear programme – the ostensible rationale for the sanctions. Iran has expressed interest in new negotiations with the United States but has met with a sceptical 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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