Tomato squeeze: US sanctions begin to hurt Iran’s economy

The Iranian government has banned tomato exports, one of the many interventions to try to limit economic instability, but the policy was not working. (AFP)
Updated 11 October 2018
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Tomato squeeze: US sanctions begin to hurt Iran’s economy

  • With US curbs on Iran’s oil exports set to come into force next month, some Iranians fear their country is entering an economic slump that may prove worse than the period from 2012 to 2015

DUBAI/LONDON: Tomato paste is not the most obvious economic indicator, but in Iran, where it is a staple that some people have started panic-buying, it says a lot about the impact of renewed US sanctions.
While Iran makes its own paste from an abundant crop of locally grown tomatoes, sanctions reimposed by US President Donald Trump since August have played havoc with supply.
A 70 percent slide in the rial this year has prompted a scramble for foreign currency that has made exports much more valuable in local terms than selling produce at home.
Some shops are limiting purchases of tomato paste, which is used in many Persian dishes, and some lines have sold out as people buy up existing stock.
The government has responded by banning tomato exports, one of a raft of interventions to try to limit economic instability that has fueled public protests and criticism of the government this year.
But the tomato policy is not working. An industry representative said tomatoes were being smuggled abroad.
“We have heard that trucks full of tomatoes are still leaving the country, especially to Iraq,” Mohammad Mir-Razavi, head of the Syndicate of Canning Industry, said by telephone.
“They put boxes of greenhouse tomatoes on top and hide normal tomatoes at the bottom,” he said, referring to an exemption for hot-house grown tomatoes that left a loophole.
It is one of many ways in which the sanctions are hurting ordinary Iranians while benefiting those with access to hard currency.
Washington reintroduced steps against Iran’s currency trade, metals and auto sectors in August after the US withdrawal from a deal that lifted sanctions in return for limits on Iran’s nuclear program. Trump said the deal was not strict enough.
With US curbs on Iran’s oil exports set to come into force next month, some Iranians fear their country is entering an economic slump that may prove worse than the period from 2012 to 2015, when it last faced major sanctions.
“There is an emerging consensus that the economy will go through a period of austerity similar to that recorded during the Iran-Iraq war,” said Mehrdad Emadi, an Iranian economist who heads energy risk analysis at London’s Betamatrix consultancy.
Jumps in prices are occurring in a range of goods — particularly imports such as mobile telephones and other consumer electronics, but also some staples. A bottle of milk, 15,000 rials last year, now sells for 36,000.
An 800-gram (28-ounce) can of tomato paste was selling in Tehran stores for around 60,000 rials in March; it is now 180,000 rials, or $1.24 at the unofficial rate, prompting a scramble by households to stock up. The price of tomatoes has increased more than five-fold compared to last year.
Signs on the shelves of some stores limit each customer to two cans. Iranian online shopping site Digikala lists the top nine tomato paste items as out of stock, and the rest as “coming soon.” In supermarkets in Najaf in neighboring Iraq, meanwhile, supplies of Iranian tomato paste are plentiful.
Adding to the pressure is a fourfold rise in the price of cans, Mir-Razavi said. Traders importing material to make cans sought to buy dollars at a little-used official rate of 42,000 rials; authorities asked them to use a more expensive rate. The issue has delayed shipments of material to factories.
The government is mounting a campaign against price-gouging, periodically ordering shopkeepers to sell at lower prices. But some shopkeepers respond by not selling at all, believing prices will eventually rise again as the sanctions bite.
Iran, a big oil producer with a diverse economy, has shown its farming, manufacturing and distribution sectors can ride out long periods of war and sanctions.
The Tehran Stock Exchange index has soared 83 percent this year as shares of exporting companies have rocketed. Urban real estate prices have also risen as Iranians plow their savings into property rather than keeping them in depreciating rials.
The rial’s plunge, which in the unofficial market has taken it to around 145,000 against the dollar from 42,890 at the end of 2017, according to currency tracking website bonbast.com, may even have strengthened the financial system in one way.
Banks and pension funds have been struggling with massive debts. Emadi said the rial’s slide, to as low as 190,000 in late September, had given the government huge windfall profits on its dollar holdings; authorities appear to have injected some of those profits into insolvent banks to shore them up, he said.
But while official data for the last few months has not yet been released, Emadi said he believed the economy was already in a recession that could deepen in coming months.
The International Monetary Fund predicted this week that the economy would shrink 1.5 percent this year and 3.6 percent in 2019, before recovering slowly.
That would make the slump less deep than the recession of 2012, when the economy shrank over 7 percent, and not nearly as damaging as the Iran-Iraq war of 1980-1988, when it shrank by about a quarter.
The IMF also forecast the average inflation rate would jump to a peak above 34 percent next year, briefly returning to its level in 2013.
How much the current recession resembles past periods of economic pain for Iran will depend on the extent to which Washington can use the sanctions to push other countries into cutting oil and non-oil trade with the Islamic Republic.
US officials have said the sanctions will be tougher than the steps in 2012-2015. They aim to reduce Iranian oil exports more sharply, and to disrupt exports to Iran from trading hubs such as Dubai more aggressively.
“I think the return of the sanctions has had a devastating effect on their economy and I think it’s going to get worse,” Trump’s national security adviser John Bolton told Reuters in late August.


Lebanon’s seabed yields its historic secrets

Updated 10 min 57 sec ago
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Lebanon’s seabed yields its historic secrets

  • Divers find pottery and stone in shipwrecks dating back 2,300 years
  • Diiscoveries are from Alexander the Great’s siege of Tyre in 332 BC

Forty meters down, on the Mediterranean seabed off the coast of Lebanon, the divers knew they were looking at history.

Among the shipwrecks they investigated this month at 11 sites south of the city of Tyre, they found pottery and stone that had been there for more than 2,300 years.

“The shape of the pottery confirms that it dates back to more than 332 BC,” said the Lebanese archaeologist Dr. Jafar Fadlallah.

Mohammed Al-Sargi, captain of the diving team that found the wrecks, is even more certain. “The pottery and stone found on these wooden ships indicate that they were part of the campaign of Alexander the Great, who in 332 BC attempted to capture the city of Tyre, which was then an island,” he said.

“According to the history books, Alexander built a causeway linking the mainland to the island. These vessels might have been used to transport the stone required for the construction of the road, but due to the heavy loads and storms, they might have sunk.”

UNESCO recognized the archaeological importance of Tyre in 1979, when it added the city to its list of World Heritage Sites. Lebanon’s Directorate of Antiquities, in cooperation with European organizations, has carried out extensive excavations since the 1940s to uncover its historical secrets. They have revealed that the ancient maritime city included residential neighborhoods, public baths, sports centers, and streets paved with mosaics. The discoveries date back to the Phoenician, Roman and Byzantine periods.

During the Phoenician era, Tyre played an important role as it dominated maritime trade. It contributed to the establishment of commercial settlements around the Mediterranean and the spread of religions in the ancient world. It also resisted occupation by the Persians and the Macedonians, choosing to remain neutral in the struggle between the two bitter enemies. However, Macedonian king Alexander the Great considered gaining control of the island and establishing a naval base there to be a key to victory in the war, and he set out in January 332 BC to conquer it at any cost.

The area in which the diving team discovered the wrecks is “an underwater desert with no valleys or seaweed, a few hundred meters from the coast of Tyre,” said Al-Sargi.

“We found 11 sites, some of them close to each other and others far apart. In each location, there were piles of stones and broken pots.

“We continued to explore the sites quietly to keep away fishermen and uninvited guests. We sought the help of archaeologists, who assured us that the discovery rewrites the history of the city, and specifically the campaign of Alexander the Great. So, we decided to put the discovery in the custody of the General Directorate of Antiquities for further exploration and interpretation.”

The most recent find, which Al-Sargi described as a “time capsule,” is only the latest important discovery made by the team in Lebanon.

“In 1997, the divers discovered the submerged city of Sidon,” Al-Sargi continued. “In 2001, we discovered the city of Yarmouta opposite the Zahrani area. In 1997, we discovered sulfuric water in the Sea of Tyre. We conducted studies on fresh-water wells in the sea off the city coast.

“We are not archaeologists and we cannot explain what we have seen. Our role is to inspect and report to the relevant Lebanese authorities and abide by the law.”

Fadlallah, an archaeologist with 40 years experience of working at Lebanon’s ancient sites, picks up the story to explain what he believes to be the significance of the discovery at Tyre.

“The sites are about 700 meters from where Tyre beach was when it was an island,” he said. “The piles of stones were 50 meters to 200 meters apart and the pots seemed to have been broken by a collision because there was not one left intact. This means that these stones and pots were on ships and there was a violent collision between them.”

He said that studies of the remains of the pots suggest that they are of Greek origin.

“There are various forms of them,” he said, “and it is clear that the ships that were carrying them were related to the ships of Alexander the Great during his campaign on Tyre, and they appear to have been hit by storms.”

There are, of course, always skeptics — among them Dr. Ali Badawi, director of archaeological sites in the south at Lebanon’s General Directorate of Antiquities. The pots alone did not constitute sufficient “evidence that the ships belonged to the campaign of Alexander the Great,” he said.

“What was published by the captain of the divers contains unclear details, and the subject should be based on scientific explanations. I think that the sea is wide and piracy was possible at the sites of the submerged ships.

“Exploration operations are taking place in the breakwater area, involving a French mission and Lebanese archaeologists. Before that, a Spanish expedition along with marine archaeologists participated in examining the remains of a ship dating back to the BC era.

“Ship exploration is very expensive, and the city of Tyre was subjected to numerous military siege campaigns and many ships sank. But this does not mean that we will not investigate this new discovery, according to the instructions of the minister of culture.”