230108_mashad

Petrol rationing imposed in June by the Government of President Ahamadinejad of Iran is beginning to take its toll on the economy. The consequent rise in petrol prices has pushed all prices up sometimes with devastating effects on trade. Key tourism cities such as Isfahan, Shiraz and the holy city of Mashad -- normally considered as indicators for economic prosperity - are hit the hardest. Almost 30 thousand traders are reported to be near bankruptcy this year in the normally flourishing Mashad Markets. The monthly rental of a small stall has gone up from 200 to 4000 pounds while at the same time demand has dropped to less than half.

Ardavan Roozbeh, the Mashad correspondent of the Persian language Zameneh Internet Radio says on average there has been a 50-60% drop in trade this year. He says his research in four major central Bazaars of Mashad shows that the large drop in the number of tourists due to the rise in price of petrol is the main reason. Mashad, located 850 kilometers north east of Tehran, with a population of just over two million, is one of the main holy cities of Iran. Thousands of pilgrims go to Mashad every year to visit the Imam Reza Shrine Complex -- one of the largest and most magnificent in Islamic history. Back in the 9th century, Imam Reza, the eighth Imam of Shiite Muslims, was poisoned and martyred in the city. Many pilgrims therefore, place a spiritual value in visiting Mashads' four major Bazaars; the Reza Bazaar and international Bazaar being the most well known. Mashad is famous for the high quality of some traditional products such as Saffron and spices, but in its "Diamond of the East Bazaar" it also prides itself with high quality ruby diamonds.

Ardavan says most traders in the four Bazaars he visited describe this year's business as "dreadful" and many expect to go bankrupt if "things don't get better." He says some claim their profits have dropped to one fifth of the figure last year. Sadeqi in the International Bazaar says his profits have halved this year. "We didn't even have enough to pay our rent," he says. Another trader, Ashrafi, working in Reza market says: "I may soon have to sell my car and perhaps even my house if things don't get better." While in previous summers stalls displayed colourful publicity inviting people in, Ardavan says this year there are hardly any customers around and you see grim looking stickers on shop windows saying, "Closed" or "For Rent." One of the traders in the International market says "may God help us," we are left with no choice.

Some younger traders are changing jobs. "I have no choice," says a shoe trader, "the market is dead this year, and my sales have dropped to almost half." He blames the rise in the price of petrol. Most customers are coming from far away places, he says, they cannot afford the "rocket high" price of petrol whether coming by train, plain, taxi or car. The price of one litre of petrol in the free market is now around 5000 Rials (US$5) compared to 400 Rials (40 cents) just a few weeks back. The rise in the cost of petrol has also put up the cost of overheads. Mirzaei sells jewellery. He says the drop in trade is "like ten to two," compared to last year. "Many of us just don't know what to do," he says. He claims that in previous years customers would be ordering in advance, but "not this year."

Summer Expectations

Ardavan says many traders normally wait for the summer months to get the bigger chunk of their annual profits but this year they feel devastated with set backs. "We waited for the summer and now with petrol rationing all our hopes are dashed," says Ashrafi in Reza Bazaar. Tourism has been hard hit in Mashad. The owner of a flat rental agency near the Imam Reza Shrine Complex says the number of pilgrims and tourists has dropped to a quarter this summer. "I've had to rent apartments to a third of their rental value," he says, "Mashad is waiting for a miracle!"

Dr. Kamran Mobasher, an Iranian economist based in Paris says the actual rise in the price of petrol is not the key element. He says in fact petrol prices should have gone up much further if they were to have any effect on the worsening state of the economy in Iran. It is the inappropriate economic adjustments over the past ten years, according to Dr. Mobasher, that have led to the present situation. He says what has made matters much worse is the mismanagement of some critical aspects of foreign relations, which have led to international confrontation and sanctions with all the subsequent consequences for trade.

Background

The government imposed rations of 100 liters of petrol a month for private cars, 450 liters for private taxis and 800 liters for shared taxis. Anything over and above that has to be purchased on the free market prices. Rationing - announced only three hours before it was due to begin - caused angry protests and chaos with long queues of cars at petrol stations. Major fluctuations in the price of petrol have traditionally had serious economic and political consequences in Iran. Although Iran is the fourth largest producer of oil and a major exporter, it lacks refining capacity and has to import 40 per cent of its petrol from abroad. Officials have argued that measures were necessary and long over-due. The main question is now how this will affect Mr. Ahmadinejad's popularity at home.