West renews business ties with Iran as economy picks up
Many Western salesmen are returning to Tehran these days. They say that after five years of disruption the Iranian economy is picking up. But they concede that so far this has not affected the everyday life of average Iranians. West Germany, Japan, Turkey, and Britain are now the top four trading partners of Iran. This move toward recovery is the result of a tight austerity policy and the replacement of many post-revolutionary idealistic theories with a new consideration for free markets.
''The Iranians are eager to regain the confidence of the international community,'' says a businessman. ''They always pay cash, refrain from borrowing from abroad, and carefully pay their debts.''
Adds a Western diplomat: ''Their civil services and factories have been reorganized. New guys are in charge. They compensate for their lack of experience with a surprising ability to learn and a will to succeed.''
The economic and monetary sanctions that followed the takeover of the United States Embassy in 1979 and the war with Iraq have dramatically reduced Iran's foreign currency reserves. ''In August '81, we found ourselves short of cash,'' once confessed Mohsen Nourbakhsh, the head of Iran's central bank. ''For every specific period of time, we had to balance our earnings and our expenditures.''
This difficult period is over. Oil production has risen tonearly 2 million barrels a day and the country has curbed its foreign expenditures. Import of ''nonessential'' goods is forbidden. A food-rationing system has been set up to reduce Iran's huge food imports. Travelers are no longer allowed to take local currency out of the country.
These reforms were imposed at the expense of the Westernized middle class which was used to imported goods. The once well-stocked European-style shops in the north of Tehran are nearly empty. Says one Iranian: ''When I married, I needed a certificate from my local revolutionary committee to buy a German-made washing machine.''
Iranian leaders now claim that the situation of their foreign reserve is satisfactory. Prime Minister Hossein Mussavi explained the broad outline of his government's economic policy in a speech before the Majlis (parliament) in January. According to Mr. Mussavi, a third of this year's budget will go to the war effort.
The government's other top priority is the development of agriculture. The Islamic regime aims to achieve food self-sufficiency within 10 years.
Mr. Mussavi also wants to reorganize existing factories to make them less dependant on foreign companies and develop small, local production units. In addition, the government plans investments in the poorest areas of the country: Baluchistan and Kurdistan. In these tasks the government relies on volunteer organizations, such as the ''reconstruction crusade,'' which helps rural areas.
How these projects are carried out remains to be seen. The very few foreign reporters are confined most of the time to Tehran and Western businessmen recognize that their experience on the field is very limited.
The Iranian authorities claim to be achieving important economic victories. Newspapers are filled with reports on the electrification of remote villages and the extension of a telephone network. The Isfahan steel mill is said to have produced 15 percent more than planned last year.
Another expanding sector is maritime transport. Iranian authorities have almost doubled the tonnage of the state-owned shipping company. This is confirmed by London-based shipping agents but it is too early to predict whether this policy will be successful.
Observers familiar with the Iranian scene believe this new stability might be threatened in the future by quarrels over the structures of the economy.
Within the government, the very reformist prime minister battles his ultraconservative minister of commerce and his supporters, who say they will never abandon the control over the economy to free marketeers.
Agriculture, too, is in an ambiguous situation. Minister of Agriculture Muhammad Salamati regularly explains how he plans to decentralize his administration but refrains from talking about the sensitive issue of land reform.
Despite several plans, the traditional structure of the Iranian agriculture remains unchanged. Only lands belonging to officials under the Shah were distributed to peasants. Several clergy leaders who are said to have close ties with big landowners oppose any change in the present system.
Inflation is by far the most pressing problem the Islamic republic faces. Officials say it is running at 15 percent a year. But Iranians say it is a lot more. Prime Minister Mussavi relentlessly repeats that his government's main objective is to cut inflation. Austerity measures helped reduce this year's budget deficit, but observers believe production bottlenecks in the economy are the main cause for the price rises.
Endemic shortages in commodities encourage wholesalers to hold stocks while waiting for prices to rise. Islamic republic supporters confess inflation is the major threat to the stability of the regime and many believe the problem can only be solved by controlling the wealthy bazaar merchants. But observers recall that these merchants became aggressive towards the Shah in 1977 after the government tried to slash inflation. Twenty months later the imperial regime was felled.