Tehran bazaar reopens but tensions remain

Tehran’s Grand Bazaar reopened under close police supervision on Saturday, traders said, days after clashes between riot police and crowds protesting against the collapse of the Iranian currency shut down the market.

But tensions still remain over the floundering rial, with money changers refusing to comply with a government order to buy and sell dollars at a fixed rate.

The resumption of trade suggested authorities had succeeded at least temporarily in containing public discontent over the plunge of the rial, which lost about a third of its value in 10 days.

But it remained unclear whether the government of president Mahmoud Ahmadinejad would be able to stabilise the currency, which has been undermined by policy missteps by Iranian authorities and Western economic sanctions against Iran over its disputed nuclear programme.

“We received an order from the money changers’ association, telling us to buy the dollar at 25,000 rials and sell at 26,000,” one exchange bureau employee told the AFP news agency. “Nobody is selling at this price and we are not trading.”

The new rate would strengthen the currency by about 25 per cent; it plunged this week to around 36,000 on the dollar.

‘Business as usual’

On Wednesday, riot police fired tear gas, fought demonstrators and arrested money changers in and around the bazaar, one of the capital’s main shopping areas. Ahmadinejad blames speculators for the rial’s slide, which is eating into
living standards and destroying jobs in the industrial sector.

But “it is business as usual today,” one merchant told Reuters by telephone on Saturday. “Shops are open and we are serving customers. Of course we are also watching the currency rates to see what is going to happen.”

Another said: “The dominant thing on every merchant’s mind is concern for tomorrow. What really bothers us is the
instability of the prices, even more than the high value for the dollar. Merchants need to be able to plan for their business and with instability in currency rates, that is almost impossible.”

Ghassem Noodeh Farahani, head of a council of business associations, was quoted by Fars news agency as saying all parts of the bazaar had reopened with security forces present to prevent any interference by “disruptors and agitators.”

“The merchants have never wanted to cause disruption and have always been friends and collaborators of the revolution,”
he said.

The sanctions, imposed because of Western suspicions that Iran is developing nuclear weapons, have slashed the  country’s hard currency earnings from oil exports, making it more difficult for the central bank to support the rial.

Pain for ordinary Iranians

Ordinary Iranians have rushed to convert their savings into US dollars to escape the rial’s depreciation and avoid high
inflation, which the government says is running at about 25 per cent but private economists put much higher.

Although staple foods and basic consumer goods produced domestically are still generally available in Iran, the extreme volatility of the currency and prices has in the past couple of weeks begun to make some foreign products unavailable, Tehran residents told Reuters.

And prices are creeping up. One man told AFP that his weekly grocery bill is up to 3m rials, about twice what he paid at the beginning of the year. Products like chicken and red meat have become unaffordable luxuries for poorer Iranians.

“When you go to the pharmacy, inexpensive medicine has become a rarity,” said Haleh, an ailing woman in her 30s. “The Iranian generics are also expensive, since the pharmacies say the key ingredients are imported with open market rate.”

A seller of imported personal computer equipment told Reuters by phone he had halted sales because he could no longer
calculate what his products were worth in rials.

In a report to the United Nations General Assembly that was released on Friday, UN chief Ban Ki-moon said the sanctions were having a “significant” effect on Iran’s people and also seemed to be harming humanitarian operations in the country.

“Even companies that have obtained the requisite licence to import food and medicine are facing difficulties in finding
third-country banks to process the transactions,” he said.

But unless Tehran allows more international monitoring of its nuclear energy programme, Iran’s economic pain looks
unlikely to prompt Western governments to ease the sanctions, and may even encourage them to take further steps.

US senator Robert Menendez, a Democrat from New Jersey and a member of the banking and foreign relations committees, told Reuters this week he was considering how to expand US sanctions against Iran, including a plan to freeze an estimated 30 per cent of its foreign currency reserves held in banks outside the country.

Meanwhile, the European Union has begun discussing the possibility of a broad trade embargo against Iran, moving beyond the energy, business and financial restrictions imposed so far, EU diplomats said.