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."

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"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.