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Tehran Traders Adopt 'Wait and See' Approach to Lifting of Sanctions

Despite positive rumblings following preliminary agreements on curbing Iran's nuclear programme, many retailers at the street-level in Tehran remain unconvinced that the end of 37-years of sanctions against the country is now a given.

Photo: Tehran: How will the Iranian capital fare in any post-sanctions regime?
Tehran: How will the Iranian capital fare in any post-sanctions regime?
Photo: Tehran: How will the Iranian capital fare in any post-sanctions regime?
Tehran: How will the Iranian capital fare in any post-sanctions regime?

A week after the P5+1 group [the United States, Britain, France, Russia and China and Germany] struck a deal with regard to curbing Iran's nuclear programme, the country's retail market remains cautious about the implications of the agreement. Despite renewed hope that sanctions are to be lifted – should the deal be officially ratified – decidedly mixed feelings remain on the streets of Tehran.

As soon as the deal was announced, the US dollar immediately dropped in value against the Iranian rial on Tehran's street markets, but it soon rallied. Indeed, the following day, the dollar continued to climb against the rial, peaking at some 32600 rials – 700 rials above the rate on the day of the initial announcement.

At street level, the reaction to the deal was muted. Mehdi, a moneychanger who operates daily in Ferdowsi Square in downtown Tehran, the site of the capital's main foreign exchange market, was clear as to why the rial appreciation against the dollar had not continued for a second day, saying: "Actually nothing has changed".

He believes few tangible shifts in the foreign exchange market will take place until a final decision on the deal has been made by the US Congress. Currently, it is expected that it will be at least two months before the US legislature makes any announcement with the regard to the deal.

In the meantime, many retailers, long accustomed to operating under the 37-year-old sanctions regime, remain unconvinced as to any likely positive outcome from the deal. In the short-term, at least, a distinct "wait and see" approach characterise the mood of many traders.

A Long-haul to Post-sanctions Prosperity

Typical of this stoic outlook is Ehsan, who runs a shop in Iran's Mobile Market. Assessing the likely implications of the deal, he said: "When you want to demolish a building, you can destroy it in just a few days. If you want to rebuild the same structure, however, it will take years.

"Iranian and US relations have been shattered over years of struggle and mistrust. I don't think they can be rebuilt in the near future, even if the two sides are determined to do so."

Ehsan also believes that a certain self-interest prevailing in the market will act to limit any immediate impact. He said: "We have a variety of smartphones on offer here and all of them have been imported at a high-dollar cost. Those who control the mobile market won't allow low foreign exchange rates and the opening of famous brand stores in Iran to diminish their wealth overnight.

"Even if the different stages of the deal go ahead as planned, prices in Tehran's mobile market will not fall for at least six months. Nothing will changes until the cellphones, laptops and other electronic devices that have already been imported have been sold at their current relatively high price."

A Mr Javaherian, who sells electric equipment in nearby Naser Khosro Street, had similar concerns. He said: "I don't think Iran's nuclear deal will have any positive impact on economic interactions with the West in the near future. It will be a while before we have access to western-made equipment and products."

Photo: On-street essentials.
On-street essentials.
Photo: On-street essentials.
On-street essentials.
Photo: In demand: Gold and jewellery.
In demand: Gold and jewellery.
Photo: In demand: Gold and jewellery.
In demand: Gold and jewellery.

According to Jahverian, as the years of sanctions wore on, Chinese and Korean products were adopted as substitutes for US and European items. Explaining the consequences of this, he says: "Customers have adapted themselves to these suppliers and their products. As a result, there won't be any sudden changes in the market place."

Other traders in Tehran take an even more pessimistic view as to the likelihood of any changes. One dealer in black market medicines, who understandably wishes to remain anonymous, said: "The economic problems of this society have nothing to do with sanctions. Even if the sanctions are lifted, it won't get rid of many of the economic woes."

Hope for Improving Economic Ties

Despite these downbeats views, there are also retailers who welcome the prospects of the sanctions being lifted. Reza, a perfume and cologne trader with a stall on the Marvi Market, said: "Thank God. Last week's deal was very positive and I believe it will stop the worsening economic situation. Hopefully, the deal will be first step toward removing the hurdles on the way to normalising ties with the major powers. This will eventually result in the lifting of sanctions, something that can only help trade."

He believes the deal will see the government bring calm to the economy and prevent the current situation deteriorating still further. He said: "The shadow of war is over. This is a big achievement."

In a reference to Sigmar Gabriel, Germany's Vice Chancellor, Reza said: "German officials are visiting Tehran. This is a good sign and can only lead to improving economic ties. God is great."

Similarly optimistic was a woman selling cologne from a small shop in Naser Khosro Street. She said she was hopeful to be able to trade in local currency once sanctions against Iranian banks were lifted. She said: "I think removing sanctions against the banks will only facilitate trade with other countries, including Dubai, where I currently source my cologne."

With opinions clearly divided at the street level, there is also a degree of dissatisfaction among a number of analysts in the country. Speaking on the Islamic Republic of Iran Broadcasting (IRIB) network, several commentators expressed concerns over the 'snapback' clause in the deal, something that could see sanctions immediately re-imposed by any of the parties to the P5+1 agreement.

Photo: Luxury goods: Set for a post-sanctions boom?
Luxury goods: Set for a post-sanctions boom?
Photo: Luxury goods: Set for a post-sanctions boom?
Luxury goods: Set for a post-sanctions boom?
Photo: Dollar imports: Colognes and perfumes.
Dollar imports: Colognes and perfumes.
Photo: Dollar imports: Colognes and perfumes.
Dollar imports: Colognes and perfumes.

With the Iran nuclear agreement now set for a stormy 60-day progress through the US Senate, few in Iran seem sure of a positive outcome. With at least two generations having grown up under the sanctions – first imposed in 1979 – the current "wait and see" approach being adopted by many seems entirely prudent.

Heshmatollah Razavi, Special Correspondent, Tehran

Content provided by Picture: HKTDC Research
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