Sunday, July 20, 2008

Blackouts, inflation, and sanctions

The same rice that I just bought in Amsterdam for $4 a kilo is $8 a kilo in Iran. Tea, according to friends who were just visiting, is up to $30 a kilo. When a friend asked her mother in Tehran what she should bring her from Amsterdam, the mother joked "rice and tea."

When a friend told me that there were blackouts in Tehran and that the sanctions were really having an effect, I thought he was joking. I thought he thought that I had become a doomsayer, like so many who no longer live in Iran, and was just feeding my hysteria. Turns out he was not joking. You can read about Iran's economic problems in an article by Thomas Erdbrink: Oil Cash May Prove A Shaky Crutch for Iran's Ahmadinejad

A small coterie of developers, oil traders and businesspeople with lucrative government contracts are profiting from the oil boom. Shiny new BMWs crowd the streets of northern Tehran, where real estate prices have doubled or tripled and where luxury developments can command $2,000 per square foot.

But the majority of Iranians have suffered from the inflation that analysts say is partly the result of government spending. Asgar Eskandiary, 32, a teacher, said he thanked God for the health insurance he bought years ago because it paid for a sinus operation. Otherwise, he and his wife would have had to spend rent money on the operation and "we would have lost our apartment for sure," he said, drinking a warm Coke at a fast-food restaurant where a blackout to save energy had deterred other customers.

Every visit to the supermarket brings unpleasant surprises, he said. The price of milk powder, which the couple needs for their infant son, increased from the equivalent of $3 to about $4.30 in just over a year's time. He makes the equivalent of about $540 a month and "can barely cope," he said. "We spend all we have for our small baby."

The teacher said he saw only one solution. "I want to write a letter to Supreme Leader Ayatollah Ali Khamenei. He needs to bring back the experts, people who know about economy. The government doesn't know what they are doing."


"We simply can't transfer money, which means that we can't buy spare parts for our factories," said Bodagh Khanbodagi, honorary president of the private Iranian-German business chamber. German export credits backing trade with Iran totaled about $730 million last year, about half the value of German export credits in 2006 and one-fifth that in 2004, according to a report by the Congressional Research Service released this month.

"Nobody's coming over, and I don't see any minister visiting here in the near future," he said, sipping tea in an office decorated with pictures of himself with German and Iranian dignitaries.

1 comment:

Jonalist said...

Russians attacking Georgia was a bad idea to resolve a issue of independence regarding breakaways South Ossetia and Abkhazia. In effect it has terminated the operation of the BP Oil Pipeline which is a major factor in driving the cost of fuel up for Europeans whom would at some time if it continues have to resort to other means of transportation and issues of major construction projects which create mass transit as opposed to individual vehicle support. The Oil Grid-Lock with Russia is showing signs of poor government managerial operation by President Vladimir Putin. It is being compared to the Oil Grid-Lock America and OPEC nations manage together yet both these Oil Grid-Locks are destined to accomplish very little if continued. As a record of non-valued accomplishments other big nations are seeing the fracture of honesty based business management and comparing how they can resolve their situation, like Brazil and Venezuela as well as China and the rest of the world. China is already purchasing the bottom of the Oil Wells which are sulfur barrel content and has a means of converting it for use and paying the absolute lowest any nation could. Iran is accused of exploiting the oil wells along the Iran-Iraq border in the land boundary between Iran and Iraq. This could be a oversight and likely handled as a oversight more easily for Iran to either re-appropriate the oil wells they claim or stop exploiting the area entirely and the solution would be to turn over those irregular excavations to Iraq instead. Neither Iran nor Iraq have anything to gain by continuing to neglect the responsibility, Iran could live without those considerations and get on with a mass transit system solution that does not utilize OIL based products.