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Economy | Goldsmiths' War

by D.H.

06 Jun 2012 23:28Comments

View from the ground: How the political and economic elites benefit from a trumped-up conflict.

D.H. is a scholar in Tehran.
[ comment ] There are few quicker ways of making money than knowing what the negotiators for Iran's nuclear program are going to say in their meetings with the international community. The meetings take place behind closed doors, of course. But listen to what the spokespeople for the sides say in the press conference that follows a sit-down -- watch their frowns and smiles. Then watch the value of the Iranian rial dip and rise accordingly.

In the opportunity between the optimism expressed after the Istanbul meeting in April and the much more equivocal statements after the Baghdad meetings in May, someone could have made a 10 percent profit on an unlimited chunk of cash. That's through a single interaction, in less than five weeks.

And someone does. Those who do are the same people set to benefit from all the recent shocks to the currency market in Iran, and from the new rise in prices that the sanctions have caused. In short, we are talking about those with intimate connections to the Iranian regime -- anyone with foreknowledge of the government's seemingly erratic international adventures and with access to the privileged entry points to the import-export market.

The entire debate about whether or not economic sanctions can impact the strength and legitimacy of the Iranian regime fails to acknowledge the economic source of the country's oligarchy. The ruling class in Iran rose out of the bazaar. The financial structure that supported the clerics in the 1979 Revolution -- which we should remember was only a generation ago -- was located in the narrow trading streets of Tehran and the main provincial cities. The same interests hold the reins today. They make their fortunes from control of the flow of goods and from fluctuations in real estate values, which allow them to reap huge margins of profit from every sort of financial activity.

Take, for example, the import and sale of cars. The government imposes tariffs larger than 100 percent on imported automobiles. At the same time, the ruling parties are allowed, through so-called free harbors, to import any item they wish untariffed. Take this example and expand it to every give-and-take you can imagine -- from eggs and fruits to electronics. A box of paper cups that until the meetings in Baghdad cost 250,000 rials now costs 600,000.

The dealer attitude is not exclusive to the bazaar. The military and bureaucratic elite have their hands in this type of speculative process. It's their bread and butter. The most active free harbors belong to the Revolutionary Guards. Economic instability does not hurt the dealer, so long as he can predict it. He can wiggle around, switch strategies, hoard goods, and adapt.

The value from which these dealers skim their margin of profit -- since their own activity cannot produce much value -- comes from the other sectors: oil and natural resources, agriculture (whose role and scale is underestimated in discussions regarding Iran's economy), and manufacturing plants. The latter two are precisely the sectors that need stability in order to prosper. Farmers and manufacturers need to be able to predict the local and international price of their products and, for the second group in particular, count on the regular inflow of machinery and technology. Naturally, these are the sectors worst hit by economic sanctions.

It's true that many of the large factories in Iran are government owned. These, too, are suffering, as evidenced by their backlog of unpaid wages. But the government can temporary shield them, using oil and gas earnings. It's the independent manufacturers, particularly the younger industries, from which the sanctions have taken the breath, the life. Take a drive to the industrial suburbs of Tehran or to the provinces. See the closed-down plants, the empty yards. That's where you can see the sanctions at work, not in the chambers of government.

The idea that some day manufacturers can become a strong political presence in Iran (as they have in Brazil, Singapore, and South Korea, for instance) and impose a modern capitalist agenda, one that would inevitably include a less adventurous foreign policy, may be just a dream. Iran has the skilled and unskilled workforce, the infrastructure, and the natural resources to get there; the political will, however, may never match the potential. Still, it's a dream worth entertaining. The competing bloody dream -- that a populace, exasperated by the economic conditions, will risk the last remnants of its stability to challenge the status quo on the street -- is not the right of foreign governments to entertain.

I do not want to imply that I know the minds of the nuclear negotiators as they walk into their meetings. Knowing their overall economic interests, however, we can at least assume that they are aware of, and prepared for, the impact they have on the market. And it is in this light that we must begin to reassess the rhetoric that's been thrown around concerning the issue of nuclear power in Iran.

What the Western press likes to refer to as the Cold War with Iran is not really a cold war at all. A better way to describe the conflict is with the Iranian expression "goldsmiths' war."

A customer enters the goldsmiths' section of a bazaar and walks into a shop. The owner greets her, asks her to sit down, and brings out the piece she asks for. Suddenly, his neighbor, who's also a goldsmith, barges in and starts a yelling match: "You're a cheat and a liar! You want to rob this lady blind just because she doesn't know her way around this place. I swear you'll have to do it over my dead body! The real price for the piece is lower than what you're saying and you know it! I have the exact same piece in my shop for much less..."

The two shop owners are in cahoots. As they go on screaming, the customer edges out of the shop, takes a walk around the market, and comes back to the neighbor's shop and buys the piece from him. Of course, the price is still much higher than it should be. The customer has overpaid, and the two shop owners divide the surplus.

This is a goldsmiths' war -- a fervid exchange of insults and threats meant to distract the bystander from recognizing and defending her real interests.

At one level of political practice, the Iranian government plays the part of both shopkeepers -- the good cop and the bad cop. It uses the international hubbub over its nuclear program to sell a populist agenda to a portion of its constituency, to justify an isolation that helps prevent the integration of the civil society with the rest of the world, and to make money off its own citizens. All governmental responsibilities have to take a backseat to a foreign policy decision whose success has no bearing on the lives of the people. The tightening and loosening of the government's hawkish stance corresponds to the immediate needs of the ruling elite.

On another level, all the major players in these nuclear negotiations are fighting a goldsmiths' war. The Obama administration uses the Iran issue to project an image of toughness. This is not to say that its stance over the issue is purely for public relations. But the constant backslapping that goes on over the most minor security measures against Iran (the revelation and celebration of Obama's funding of minimally effectual cyberattacks, for instance) and the threats of large-scale military action (when the United States can barely handle the situation in Iraq and Afghanistan) are more for the benefit of the U.S. voting public than the Iranian government. A real threat could just as well have been communicated to Iran discreetly, seriously.

The same is true of Netanyahu's threats of military action against the nuclear sites in Iran -- which many high-ranking former members of Israel's military and security forces have characterized as empty or ridiculous. Take, for example, the following statement by Yuval Diskin, the former head of Shin Bet:

A barking dog doesn't bite, and I regret to say that I've been hearing too much barking in the State of Israel in that context. They're creating a misrepresentation for the public here on the Iranian issue. They're creating the sense that if the state of Israel doesn't act then Iran will have a nuclear bomb -- and this part of the sentence apparently contains a kernel of well-founded truth. But, the second part of the sentence, in which they appeal to, pardon the phrase, the "dumb public" -- or the lay public would be more correct -- and they say to it that if the State of Israel does act, there won't be [an Iranian] nuclear bomb. And that is precisely the incorrect part of the sentence, or the misrepresentation in the sentence.

This misrepresentation, if it exists, is not merely technical, a matter of differing opinions on strategy. The Israeli press is already framing the upcoming presidential elections there as a referendum on Netanyahu's hawkish policy (read rhetoric) on Iran. The Iran issue, in other words, is serving to distract Israel's citizens from all other important issues that concern them. In the same manner, the Bush administration used the War on Terror to distract American voters.

In this goldsmiths' war, it is the Iranian public -- and, to a much lesser but nonetheless significant degree, the American and Israeli publics -- who pay the price. Every analysis, news report, or discussion that takes the rhetoric of the politicians at face value and merely reproduces it is fanning the mendacious flames.

related reading | Corruption Without End | Iran Primer: The Bazaar

Copyright © 2012 Tehran Bureau

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