09022014Tue

Iran bans 'luxury' imports as sanctions bite

The Associated Press

By BRIAN MURPHY

TEHRAN, Iran (AP) — Iran's sanctions-fighting "resistance economy" suddenly got a lot leaner, less flashy and perhaps a bit more uncomfortable.

The Islamic Republic announced Thursday a ban on imports of 75 so-called luxury products — ranging from high-end cars to coffee to toilet paper — part of efforts to promote domestic products and stem the outflow of dollars and other foreign currency as Western economic pressures increasingly choke off Iran's commerce and critical oil revenue.

It's the most sweeping measure so far to batten down the Iranian economy, although the move is not likely to leave showrooms and store shelves empty.

It allows for foreign parts to be shipped in for local assembly plants, which make cars such as Peugeots, European-brand home appliances, laptops and mobile phones — all covered by the new ban.

There also are many Iranian-made alternatives to the list of now-blocked toiletries and beauty products — toothpaste, soap, shampoo, cosmetics and even toilet paper — but many consumers strongly prefer often better-quality imports from Europe, Turkey and the Middle East.

"It seems the government is desperate to control the flow of money outside the country," said Mehrzad Boroujerdi, a Syracuse University professor who follows Iranian affairs. "If you want a clear signal about how the sanctions are hitting Iran, this is a good one."

Western sanctions have cut sharply into Iran's oil sales, which account for 80 percent of the country's foreign currency revenue. At the same time, Iran has been barred from the major international banking systems, which has helped push the Iranian currency to record lows and forced merchants to resort to hand-carrying gold and cash from the nearby commercial hubs of Istanbul or Dubai.

Last week, in an attempt to control the rush of capital out of its borders, Iran prohibited exports of gold without a license issued by the country's Central Bank.

Iranian officials, meanwhile, have floated proposals to roll back some of the country's uranium enrichment — the centerpiece of the battle over Tehran's nuclear program — if the U.S. and European allies remove some sanctions. Western leaders have given no clear response about the possibility of resuming nuclear talks with such proposals on the table.

President Barack Obama has strongly favored a combination of sanctions and diplomacy to try to wrest concessions from Iran. In Paris last week, French President Francois Hollande said his country would favor as many sanctions "as necessary" to rein in Iran's nuclear ambitions, which the West and allies fear could lead to atomic weapons. Iran says it only seeks reactors for energy and medical research.

It's unlikely that squeezing consumer choices will be enough to touch off major street protests, which would certainly be met by swift crackdowns. But the steps could directly affect Tehran's main bazaar, which acts as a clearing house for many imported products. In early October, many bazaar merchants staged a rare strike after the Iranian currency, the rial, plummeted more than 40 percent in value in the span of a few months.

A Commerce Ministry official, Sasan Khodaei, was quoted by the IRAN newspaper as saying the reason for the import ban was to keep Iran's foreign currency within its borders, as part of a so-called "resistance economy" to try to ride out sanctions.

"Last year the amount of import of luxury goods was about $4 billion. By stopping permits on them there will be a remarkable saving of hard currency," said Khodaei, who also predicted that some items on the current banned list, such as laptops and cellphones, could be removed eventually because there may not be enough domestic production to meet demand.

With 75 million people and a highly developed middle class, Iran has long been one of the major consumer markets in the Middle East. Nearly every major foreign brand — Coca-Cola Co., Samsung Electronics, Panasonic — make their way to Iran through local subsidiaries or assembly plants. Other products such as Apple iPads arrive via black market routes from Turkey, the Caspian Sea or across the Persian Gulf.

Critics say the new bans will only boost smuggling, which now comprises $15 billion worth of goods annually, according to some estimates. That's more than three times the import of "luxury" goods cited by the Commerce Ministry.

"People will find a way to smuggle in what the Iranian consumer wants," said Boroujerdi. "They always have."

Murphy reported from Dubai, United Arab Emirates.

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