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And Life Goes On: An Iran Snapshot


17 Jan 2011 19:38Comments


[ passport ] This past December, I had the chance to visit Iran. It had been two-and-a-half years since my last visit, and I was keen to observe what had changed and how my image of the country that had developed abroad differed from the realities on the ground. With fears provoked by the crackdown in the aftermath of the 2009 elections, I know many friends who have also refrained from visiting Iran in the past two years.

I spent two-and-a-half weeks in Iran, mostly in Tehran, with a three-day trip to Yazd. I talked with dozens of friends and acquaintances in academia and business circles, drove around the city and took cabs, digging as deep as I could to fully understand what I was observing. Naturally, these notes should be taken only as personal perceptions, inescapably colored by my own biases, and not as a serious survey of Iranian society today. It is especially important to recognize that my close personal contacts are largely limited to those relatively well educated and wealthy and are not representative of the Iranian population at large.

Tehran: Life Goes On

The city seems little changed since 2008. There is not much new private housing construction. Similarly, there are few new shops, malls, and fancy restaurants. The proliferation of such new businesses was impressive before 2008, but no longer.

There are two major exceptions to this trend. First, major improvements in the city could be observed in the transportation sector -- new metro lines, fast bus routes, and improved traffic management have made traffic in Tehran somewhat more bearable than it was during my last visit. I took multiple trips across the city at different times of the day in one direction or another, and the traffic, while aggravating at some hours, never prolonged my trips to more than double the minimum travel time. However, there is a good chance that my observations were skewed by the timing of my visit, which corresponded both with odd/even-day traffic limits imposed to combat air pollution and the fuel price shock of subsidy reform.

Second, the growth of the private banking sector is quite evident. There are now some 30-odd bank chains in Iran, with branches of one or two on seemingly every corner. I don't know exactly how they can all make money, but borrowing money outside of Iran at low interest and lending it domestically at much higher rates -- in other words, taking advantage of the government's insistence on keeping the dollar exchange rate constant -- could be a major factor.

Coffee shops, restaurants, and the mountains right next door remain the major attractions for the city's youth. According to my friends, the art scene is in okay shape, with two dozen theatrical performances going on any given evening and several galleries providing venues for up-and-coming artists. Nevertheless, the growing cultural restrictions in recent years have visibly hurt the arts. There are far fewer live music performances, and in contrast to the previous decade, the art scene seems to be contracting rather than expanding.

Finally, air pollution remains a major annoyance and a source of various illnesses. This winter, the situation was even worse than usual due to a prolonged lack of precipitation. People are hoping that the hike in fuel prices may help rein in the pollution in coming months.

Overall, the residents of Tehran are happy with their mayor, Mohammad Bagher Ghalibaf, who is seen as a pragmatic and open-minded manager. He is credited with doing the most for the city next to the legendary Gholam-Hossein Karbaschi.

Economy: Reform and Stagnation

The subsidy reform is the biggest change in economic policy that Iran has seen in many years. It removes government subsidies in different areas, most notably energy and basic food items. In return, the government is paying a portion of the savings in cash to each household. The reform is generally seen as a positive step toward correcting prices and increasing economic efficiency, but the short-term risks of inflation and disproportionate pressures on certain groups have prompted widespread criticism. Some predict that inflation resulting from the initiative will significantly hurt Mahmoud Ahmadinejad's image among his core group of supporters in the lower income brackets.

I was in Iran when the reform plan went into effect, and overall I was impressed by how effectively the government handled the shift. Through a mix of psychological ruses, contradictory signals, and threats, the government succeeded in keeping the immediate backlash of the major fuel price increases to a minimum. For example, upon announcing the new policy, it also offered an "extra" ration of 100 tomans worth of fuel for every car, to be consumed within a month. As a result the first reaction of many people to the huge price hike was to increase consumption! This simple trick confused people and unlike the first time the government increased fuel prices substantially, in summer 2007, there was very little protest (except for diesel truck owners, who faced a much greater price hike).

A major impediment to growth is the outflow of skilled workers, investors, and entrepreneurs from the country. This trend is very noticeable -- about half of my remaining friends in Iran are seriously considering immigration. Hand in hand with reduced optimism, the impulse to seek one's fortunes elsewhere has been strengthened by the post-election crackdowns and political turmoil. Hopes for the future are at a very low ebb among the well educated. A closely related trend has been the replacement of experienced managers in the government by acolytes and supporters of Ahmadinejad. The established bureaucracy has been rattled, sometimes for the better, but often at the cost of rampant mismanagement and new rounds of trial and error that disrupt the economy. These factors, difficult to quantify, may have a serious impact on Iran's growth potential in the coming years.

Foreign sanctions have taken a toll throughout the economy. Most people I talked with believe that the sanctions have not stopped the flow of goods in any particular sector, but have led to both greater costs and delays. It appears that the various schemes for evading sanctions are becoming ever more efficient, so their pressure may actually be in decline. There are now increasingly complex money laundering schemes involving multiple firms in Eastern Europe, Asia, and the Middle East to facilitate the transfer of money to and from Iran.

Overall, the cost of any foreign transaction has increased between 5 and 35 percent as a result of the sanctions. However, contrary to what proponents of the sanctions had in mind, smaller entrepreneurs and private businesses are bearing most of the added costs, while larger businesses and those with government connections enjoy more efficient ways of getting around the roadblocks. In fact, the latter group is probably making extra profits due to the competitive advantage it derives from the sanctions relative to the small and mid-sized business sector.

Despite the significant drags on the economy, there are still large private (but well-connected) development projects, including a luxury residential development south of Tehran and a new amusement park west of the city. Those involved in these projects do not seem much concerned about the sanctions. Oil futures pose no threat, and economic dissatisfaction, while rampant, is far from boiling level. While Iran's economic outlook over the next few years does not strike me as promising, neither is it is as bad as most observers in the West suggest.

Politics: Lost Hope

While politics is the most talked about aspect of Iran outside the country, the new insights I gathered from talking with people there were limited. Censorship, crackdowns, and the daily pressures of life have yielded political apathy. While there are still many Green Movement sympathizers, they are not very active, nor that hopeful, and the hot political debates that used to galvanize certain social circles attract fewer participants these days.

The major shift in power over the last few years has been the rise of Ahamdinejad's faction and its alliance with Ayatollah Ali Khamenei and Sepah (the Islamic Revolutionary Guard Corps) to oust the supporters of Akbar Hashemi Rafsanjani and sideline the old clerical conservatives. Having weakened their major competitors -- reformists are almost completely shut out now -- and harboring potentially serious ideological and practical policy differences, many people think that there is a good chance the Khamenei and Ahmadinejad factions will face off in the coming year or two. Sepah's position in such a potential face-off is critical and, from what I have heard, not at all certain. Some suggest that Sepah has been organized so that Khamenei's command over it is hard to challenge, while others point to the increasing power of commander-merchants in its ranks who are benefiting from Ahmadinejad's administration and may prefer to align with him. Most people I talked to think that these power groups in fact behave more as economic agents than as ideological ones.

Many think Esfandiar Rahim Mashaei, Ahmadinejad's controversial aide, is seriously considering a presidential bid in 2013. A group of wealthy families have already started operational planning for his campaign and he is positioning himself as a pragmatic nationalist figure who can attract the masses. Khamenei may not be very happy with Mashaei, due to differences both personal and ideological. Yet the ayatollah has few alternatives. Ghalibaf, the main potential contender on the scene, may not be conservative enough for his taste. Contrary to the common wisdom among Iranians abroad, many in the country think that there could be real competition in the next election if serious contenders are approved by the Guardian Council. In fact I talked with a few Green Movement supporters who had come to accept that Ahmadinejad might indeed have won the majority of the vote in 2009 -- though most, certainly in Tehran, continue to believe that massive fraud took place. In any event, assuming that the actual vote will be relevant in 2013, the next presidential contest may be even more complex than the previous: The relatively liberal voters and opinion leaders are likely to boycott the election, leaving the competing conservatives to fight over the volatile voting blocs that form their constituency.

Turning to international politics, the impact of sanctions on Iran's internal political affairs is limited and hardly in accord with what the West has had in mind. The sanctions are largely seen as an unwelcome intervention by foreigners, rather than as the result of poor judgment by the current administration in its nuclear negotiations. This view is not dominant among Green Movement supporters, many of whom do blame the government for the sanctions, but appears to be common when one talks to those who lean in other directions. The economic impact, while troublesome overall, is neither paralyzing nor successful in targeting the government. To the contrary, the sanctions seem to be hurting private businesses and people with contacts in the West most. For example, while I was in Iran, I heard about the arrest of Iranian-American philanthropists who have been handling the financial transactions of Child Foundation, an impressive non-profit that takes care of poor and ill children in Iran through donations from the West.

When I returned to the United States, a customs agent took me aside and informed me that bringing back goods from Iran in excess of $100 is a violation of sanctions. He courteously explained that they typically don't enforce this for goods under $500 to $700, but take things quite seriously beyond that point. I later heard of several people who had their carpets and other items confiscated upon entering the United States in the past few weeks. This sort of experience is enough to turn many of my mostly anti-regime family members against the sanctions, not to mention the effect on those with more pro-government sentiments who might have valuable channels to the regime's decision makers. Such short-sighted policies certainly alienate any constituency in Iran that could turn the sanctions into a tool for policy change. I didn't hear anybody who supported military intervention, though I suspect there are a few who hold that opinion.

News, Media, and Culture: The Spread of Satellite TV

The growth in government-imposed restrictions has lead to a reduction in artistic and cultural activities over the past couple of years. There are fewer independent movies, and only cheap comedies are still making money. The news channels that are legally allowed to operate are censored and grossly biased, and many in my circle of friends have completely abandoned them. Yet these channels are likely to continue to serve as the country's biggest opinion shapers, considering the size of the audience outside educated urbanites. Internet access in large cities is more available than two years ago and residential 128-256 kb/s connections are common. You can find multiple wireless signals (mostly password protected) in many houses north of Tehran.

The biggest observable change for me was the widespread presence of satellite channels in middle- and lower-income households (the upper classes have had them for years). Several friends pointed to the ubiquity of satellite dishes in their hometowns and villages. Cheaper and more diverse than any alternative entertainment technology, their rate of adoption has been high despite government bans. The biggest hit is Farsi1, a soap-opera channel that dubs cheesy Korean and Latin American offerings. It was the background distraction in many homes I visited. Manoto 1 and 2 are two new channels geared toward documentaries and reality shows that seem to be attracting a following very quickly. The traditional news channels such as VOA and BBC, which took off in the aftermath of the 2009 election, are less widely viewed today, though they continue to provide an alternative to government-controlled media for those who have abandoned the latter. The spread of satellite TV poses a definite obstacle to the hegemony over information sought by the government and is likely to continue the globalization and modernization of Iranian culture.

Tourism: The Warning Sign

We had an opportunity to visit Yazd for three days. The trip was one of the best I have had in Iran -- the city and surrounding area are full of beautiful sites and the people are sincere and friendly. If you happen to visit, don't overlook the palace in Saryazd, 30 kilometers south of Yazd, and the Zein-O-Din caravanserai, 60 kilometers south (if the local government has not shut it down, as threatened). Many attractions in Maybod, Kharanagh, and Yazd itself make it a perfect four-to-five-day cultural destination. Yet it was a bittersweet experience, as we saw one amazing monument and cultural site after another with very few visitors. Lovely traditional houses-turned-hotels had fewer guests than they needed to break even -- the result of the recent sharp rise in energy prices and the disappearance of international tourists due to negative publicity about Iran, the uncertainties caused by the authorities' security posture, and the sanctions. Several splendid restoration and investment projects were facing financial losses as a result.

Tourism, potentially Iran's most lucrative industry, is the warning sign for where Iran's economy could head, as it is most adversely impacted by many of the current problems: the inflated value of the rial, sanctions, unsettled investment atmosphere, and dominance of security concerns over economic enterprise all have a direct bearing on tourism. This is where one can quickly and unmistakably observe the full effects of Iran's economic-political quandary.

Academia: Money Is Not Enough

Two major observations came out of my conversations with academics. First, the general condition of the country and the government's interventions in the university system -- centralizing the admission of Ph.D. students and hiring of professors, restrictions on social sciences, forced retirements -- has given them a very negative outlook. Some see the current situation as similar to the 1980s and the cultural revolution, if not quite so extreme. As elsewhere, hopes are low and people are in a defensive mode.

On the other hand, the economic prospects of university faculty have improved significantly. The base salary is now one-and-a-half to two million tomans ($1,500-2,000) per month, with an additional income of one to two million possible through publications and graduate student training bonuses. More aggressive professors can earn as much as ten million per month by taking on industry or government-funded research projects. In contrast to U.S. norms, academics are not limited in how much they can draw in personal salary and bonuses from such projects. The financial payoffs are tied closely to performance metrics defined by the government, which are largely aligned with the American publication-maximizing system, but also have their own peculiar elements, such as extra points for membership in the professors' militia (Basij Asaatid).

Day-to-Day Life: Coping with Uncertainty

Coping with uncertainty is what most distinguishes daily life in Iran from that in the United States. Uncertainty is present everywhere, from the behavior of the driver next to you to the process of obtaining a license, from buying a given retail item to producing it. Uncertainty is partly created by external factors such as sanctions, partly by government interventions that add layers of complexity to any bureaucratic task, and partly by a culture that has learned to handle uncertainty with uncertainty.

When you can't rely on your supplier's promise, your own promise will prove unreliable, so you learn not to promise, but to phrase things in uncertain terms to hedge against an array of developments beyond your control. In this way, everybody learns to be vague, even to value lack of clarity, and uncertainty propagates within every aspect of life. This can be very stressful for those who are used to the Western discursive and operational style. In the short run, it can also be very exciting, as every day you come across something unexpected. But over the long run, it is a major strain on the psyche of Iranians with possible or already manifest consequences in psychological disorders, aggressiveness, and rising crime rates.

The effects of this milieu of uncertainty, present in Iran for some time, have been exacerbated over the past few years due to increased work pressures and the steady diminution of psychological and practical buffers that traditionally existed in the form of tight family, friendship, and neighborhood networks.

Final Thoughts: It Is Easy to Lose Contact

Iran continues to change rapidly, and every time I have visited it in the last decade it has had something to surprise me. Information sources outside the country almost uniformly focus on negative political news. Without the visits I have been able to make, I could easily see becoming locked into a biased, inaccurate view of the country, its people, and its prospects. While the picture that develops as one spends time in Iran today is not rosy by any standard, it is still notably better than the picture that one is fed outside of the country and which begins to take hold after a couple of years. Life goes on in spite of politics and it is very hard to understand the complex factors affecting Iran and its people through the information channels we have access to abroad.

Copyright © 2011 Tehran Bureau

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