Warnings Over a Repeat of 1979

Hamid Ahadi, Rooz Online:

With the heightening of tensions over the nuclear issue, the Iranian government has permitted government business entities to make large imports, while transportation officials have issued warnings that the country’s infrastructure, and particularly its port facilities, are not in a position to handle larger import volumes.

Reports indicate that since two months ago, imports into the country have increased at an accelerating pace hitting the 670 million tons of goods worth $6 billion.

It is said that through this policy, the regime is not only stockpiling for an emergency which could come about because of economic sanctions against the country, but it is also winning over the bazaar and businessmen and leaders of the right. Experts however have warned that this pace in imports is destructive for domestic industries. READ MORE

The imports during the two months have included electrical goods, iron and metals, primary plastic material, chemicals, paper, cardboard, wheat, sugar, corn, medical products and fertilizers. Most of the imports are from China, United Arab Emirates, Germany, South Korea, France, Italy, India, Switzerland, Japan and the UK. While Britain has sent signals that like the US it is not too keen on direct exports to Iran, the government’s linkage of its political issues to the country’s economic needs has resulted in larger imports through Dubai.

Because the government’s policies of larger imports of china have shut down many textile plants, in addition to glassware plants, experts believe these two areas are going to be the next battleground and crisis points for the country. Many of these imports are from China and their lower prices have already led to protests by local businesses and the textile industry is a prime example. Local producers of course lack any effective means to protect their interests and businesses.

During the last 10 years, Iran’s imports have increased from $14 billion to $41 billion in president Ahmadinejad’s 1st year administration. This year, the figures is estimated to be $50 billion. This is known as the Dutch illness in economic circles and an economist told Rooz that it is prevalent in countries that depend on only single commodity as their largest source of revenue - oil in this case. The government in fact has been promoting this policy by making dollars available to businessmen.

Just recently some 50 leading economists in Iran wrote an open letter to the president warning him of impending economic crises if the current trends continued. They specifically mentioned the need to review the imports policy of consumer goods. Pro-government media harshly attacked the report of the economists, accusing them of waging a psychological war.

One of the authors of the letter has told Rooz that they intend to write another letter to the leader of the regime presenting their concerns.