US sanctions squeeze Iran middle class, upend housing sector

Iran’s large middle class has been hit hard by the fallout from unprecedented US sanctions, including the collapse of the national currency. (AP)
Updated 23 July 2019

US sanctions squeeze Iran middle class, upend housing sector

  • Most Iranians were hit hard by the collapse of the national currency, accelerating inflation and eroding wages
  • Perhaps most devastating for Iran’s large middle class has been the sharp spike in housing prices, more than double in a year

TEHRAN, Iran: Stay-at-home mom Maryam Alidadi used to lead a comfortable middle-class life. The 35-year-old and her husband, a mechanic, could afford a spacious rental apartment in a central neighborhood of Tehran, along with a car, occasional restaurant meals and holidays abroad.
Now they are barely hanging on, even after drastically cutting spending.
Like most Iranians, the family was hit hard by the collapse of the national currency, accelerating inflation and eroding wages — fallout from unprecedented US sanctions.
Perhaps most devastating for Iran’s large middle class has been the sharp spike in housing prices, more than double in a year. That has uprooted tenants and made home ownership unattainable for most.
The Alidadis sold their car and borrowed from friends and family to buy a smaller apartment in a less desirable area on the outskirts of Tehran — in hindsight a smart move, since they’ve been priced out of their old neighborhood by now.
“Right now, this is the most difficult period ever,” said Alidadi’s 58-year-old mother, Shahla Allahverdi, reflecting on the Islamic Republic’s 40-year history as she shared a park bench with her daughter.
Iranians worry about the future as tensions between Iran and the West continue to rise.
The escalation — triggered by the Trump administration’s withdrawal last year from Iran’s 2015 nuclear deal with world powers — seems unstoppable, and European mediators trying to defuse the situation keep coming up short.
The showdown between Washington and Tehran has upended the lives of Iranians as they try to survive on less. A bride borrowed a wedding dress because she couldn’t afford to buy or even rent one. More newlyweds move in with their families to save money. Visa requests are up at foreign embassies, with young Iranians eager to leave.
Some wonder how far Washington is willing to push its “maximum pressure” campaign.
The Trump administration says the sanctions are aimed at getting Iran to renegotiate the nuclear deal, which offered sanctions relief in exchange for curbs on Iran’s nuclear program.
Washington denies its ultimate aim is to end the rule of Shiite Muslim clerics — though John Bolton, an architect of the pressure campaign, called for regime change before he became Trump’s national security adviser.
Some say Washington’s actions appear to have strengthened the paramilitary Revolutionary Guard and other hard-liners at the expense of President Hassan Rouhani, once the nuclear deal’s most prominent champion.
The Guard has been able to deepen its role in the economy, domestic politics and foreign policy under the guise of security, said Ellie Geranmayeh, a senior fellow at the European Council on Foreign Relations.
Despite the economic upheaval, there have only been sporadic protests.
Iran analyst Adnan Tabatabai said he believes Iranians are “reluctant to take their grievances to the street” for now, amid fear of further chaos and pushback by the authorities.
The economy contracted by 4.9% from March 2018 to March 2019. It is expected to shrink by an additional 5.5% in the year ending March 2020, according to Iranian figures. The official inflation rate has risen to 35%, up from 23.8% in the March 2018 to March 2019 period.
The housing and construction sector, which makes up about one-quarter of the economy and is the top destination for savings and investments, has been thrown out of balance.
Property owners are reluctant to sell and landlords are sharply raising rents because of the currency collapse, said Ali Dadpay, a finance professor at the University of Dallas. He said an estimated 490,000 homes stand empty in and around the capital, including more than 40,000 units added this year.
At the same time, construction lags far behind the need of 1.2 million new homes a year nationwide, said Hesam Oghabaei, deputy head of the Tehran association of real estate agents. He said about 25% of Tehran’s residents live in rented apartments, and the vast majority cannot afford the price increases.
The Peyman family — elderly parents and eight adult children — own a 110 square meter (1,180 square feet) apartment in Tehran’s District 12, a poor area plagued by drug addiction and other social problems. More than a decade ago, the Peymans rented the apartment, and used the extra income to move to a nicer area.
Now they are back in District 12, renovating the old apartment after being squeezed out of the good neighborhood by a rent hike.
“We have to come here because we have no other choice,” said the patriarch, Muslim, 65. Four unmarried children will live with him and his wife. Across-the-board price increases put marriage out of reach.
One of Tehran’s newest areas, District 22, is under construction on the northwestern edge of the city. It consists of apartment high-rises and shopping malls arranged around an artificial lake called Chitgar.
Maryam Alidadi and her husband bought an 82-square-meter (880 square feet) apartment here in December, downsizing by a third from their rented home in a more affluent area.
“Our standard of living has dropped considerably,” she said, adding that she now regrets having quit her government job four years ago when her son Rami was born.
The US sanctions have proven particularly devastating for Iran’s large middle class, said Dadpay, the finance professor. “This is the economic class that depends on the global economy, depends on their skillsets, and most of them are earning fixed incomes,” he said.
The economic freefall could shape Iran’s domestic politics, with parliament elections in February posing the first test. Middle class voters have traditionally favored reformist candidates but might sit out voting because of a lack of alternatives, inadvertently boosting hard-liners.
Pro-reform politicians who favor a greater opening to the West are closely linked to the nuclear deal.
With the deal faltering, the hard-liners, including the Revolutionary Guard, are becoming more entrenched, said Geranmayeh, the analyst.
The Guard, she said, “is going to be a force to be reckoned with for many years to come.”


Squabbles erupt as G7 leaders open summit in French resort

Updated 25 August 2019

Squabbles erupt as G7 leaders open summit in French resort

  • Disputes on trade, climate may eclipse Macron’s agenda
  • EU’s Tusk warns of lack of global unity, spars with Johnson

BIARRITZ, France: Squabbles erupted among G7 nations on Saturday as their leaders gathered for an annual summit, exposing sharp differences on global trade tensions, Britain’s exit from the EU and how to respond to the fires raging in the Amazon rainforest.
French President Emmanuel Macron, the summit host, planned the three-day meeting in the Atlantic seaside resort of Biarritz as a chance to unite a group of wealthy countries that has struggled in recent years to speak with one voice.
Macron set an agenda for the group — France, Britain, Canada, Germany, Italy, Japan and the United States — that included the defense of democracy, gender equality, education and the environment. He invited Asian, African and Latin American leaders to join them for a global push on these issues.
However, in a bleak assessment of relations between once-close allies, European Council President Donald Tusk said it was getting “increasingly” hard to find common ground.
“This is another G7 summit which will be a difficult test of unity and solidarity of the free world and its leaders,” he told reporters ahead of the meeting. “This may be the last moment to restore our political community.”
US President Donald Trump had brought last year’s G7 summit to an acrimonious end, walking out early from the gathering in Canada and rejecting the final communique.
Trump arrived in France a day after responding to a new round of Chinese tariffs by announcing that Washington would impose an additional 5% duty on some $550 billion worth of Chinese imports, the latest escalation of the tit-for-tat trade war by the world’s two largest economies.
“So far so good,” Trump told reporters as he sat on a seafront terrace with Macron, saying the two leaders had a special relationship. “We’ll accomplish a lot this weekend.”
Macron listed foreign policy issues the two would address, including Libya, Syria and North Korea, and said they shared the objective of preventing Iran from obtaining nuclear weapons.
Trump later wrote on Twitter that lunch with Macron was the best meeting the pair has yet had, and that a meeting with world leaders on Saturday evening also “went very well.”
However, the initial smiles could not disguise the opposing approaches of Trump and Macron to many problems, including the knotty questions of protectionism and tax.
Before his arrival, Trump repeated a threat to tax French wines in retaliation for a new French levy on digital services, which he says unfairly targets US companies.
Two US officials said the Trump delegation was also irked that Macron had skewed the focus of the G7 meeting to “niche issues” at the expense of the global economy, which many leaders worry is slowing sharply and at risk of slipping into recession.
French riot police used water cannons and tear gas on Saturday to disperse anti-capitalism protesters in Bayonne, near Biarritz. A police helicopter circled as protesters taunted lines of police.
The leaders themselves were gathering behind tight security in a waterfront conference venue, the surrounding streets barricaded by police.

Spat over ‘Mr. No Deal’ Brexit
Macron opened the summit with a dinner at the base of a clifftop lighthouse overlooking Biarritz, where a menu of piperade, a Basque vegetable specialty, tuna and French cheeses awaited the leaders.
Adding to the unpredictable dynamic between the G7 leaders are the new realities facing Brexit-bound Britain: dwindling influence in Europe and growing dependency on the United States.
New Prime Minister Boris Johnson will want to strike a balance between not alienating Britain’s European allies and not irritating Trump and possibly jeopardizing future trade ties. Johnson and Trump will hold bilateral talks on Sunday morning.
Johnson and Tusk sparred before the summit over who would be to blame if Britain leaves the EU on Oct. 31 without a withdrawal agreement.
Tusk told reporters he was open to ideas from Johnson on how to avoid a no-deal Brexit when the two men meet.
“I still hope that PM Johnson will not like to go down in history as Mr.No Deal,” said Tusk, who as council president leads the political direction of the 28-nation European Union.
Johnson, who has said since he took office last month that he will take Britain out of the bloc on Oct. 31 regardless of whether a deal can be reached, later retorted that it would be Tusk himself who would carry the mantle if Britain could not secure a new withdrawal agreement.
“I would say to our friends in the EU if they don’t want a no-deal Brexit then we’ve got to get rid of the backstop from the treaty,” Johnson told reporters, referring to the Irish border protocol that would keep the border between Northern Ireland and EU member Ireland open after Brexit.
“If Donald Tusk doesn’t want to go down as Mr.No Deal then I hope that point will be borne in mind by him, too,” Johnson said on his flight to France.
Johnson is trying to persuade EU leaders to drop the backstop from a withdrawal agreement that was negotiated by his predecessor but rejected three times by the British Parliament as the United Kingdom struggles to fulfill a 2016 referendum vote to leave the bloc.

‘Not the way to proceed’
Despite the Brexit tensions, diplomats played down the likelihood of Trump and Johnson joining hands against the rest, citing Britain’s foreign policy alignment with Europe on issues from Iran and trade to climate change.
“There won’t be a G5+2,” one senior G7 diplomat said.
Indeed, Johnson said he would tell Trump to pull back from a trade war that is already destabilising economic growth around the world.
“This is not the way to proceed,” he said. “Apart from everything else, those who support the tariffs are at risk of incurring the blame for the downturn in the global economy, irrespective of whether or not that is true.”
Anti-summit protests have become common, and on Saturday thousands of anti-globalization activists, Basque separatists and “yellow vest” protesters marched peacefully across France’s border with Spain to demand action from the leaders.
“It’s more money for the rich and nothing for the poor,” said Alain Missana, an electrician wearing a yellow vest — symbol of anti-government protests that have rattled France for months.
EU leaders piled pressure on Friday on Brazilian President Jair Bolsonaro over fires raging in the Amazon rainforest.
Even so, Britain and Germany were at odds with Macron’s decision to pressure Brazil by blocking a trade deal between the EU and the Mercosur group of Brazil, Argentina, Uruguay and Paraguay.
A spokesman for German Chancellor Angela Merkel said not concluding the trade deal was “not the appropriate answer to what is happening in Brazil now.”
The UK’s Johnson appeared to disagree with Macron on how to respond. “There are all sorts of people who will take any excuse at all to interfere with trade and to frustrate trade deals and I don’t want to see that,” he said.