Iranians prepare for life after sanctions

For book lovers at a recent exhibition in Tehran the “Buy Direct From Amazon” poster summed up their plight: if something seems too good to be true, it usually is.

Iranian consumers, unlike millions who use the US online retail giant’s global websites every day, cannot click and buy. Besides lacking credit cards, they are sealed off from international banking because of sanctions.

But if their pockets are deep enough, there is another way: Iranian middlemen, who profit from smuggling in a black market of highly desirable goods. The removal of sanctions under Iran’s nuclear deal with the West is bad news for them, but they’ve long had it good.

At the Tehran Book Fair it wasn’t Amazon that was advertising but a local firm offering the latest English-language best-sellers — bought and sold on at around three times the original online price.

The same applies to other Western goods, be it smartphones, cosmetics or clothes. Traders, lacking open competition, jack up prices and cash in on demand.

For Mohammad Gholi Yousefi, an economics professor at Allameh Tabatabai University in Tehran, the nuclear agreement can only be positive, bringing better deals and more choice.

“The economy is like a phone line and the more countries you have a connection with, the better trade can be,” he said.

“If goods are imported freely, we can have constructive relationships with the manufacturing countries in Europe or America and get rid of the middlemen.”

Iranian President Hassan Rouhani made the same point when pushing for a nuclear deal, saying in April that sanctions-busters operating in the black market “should now think about a new job.”

A combination of UN, US and European measures imposed since 2006, dubbed by experts as the world’s most sophisticated sanctions regime, has frozen Iran out of the world’s formal economy.

But with a population of 78 million, the country is seen as untapped. Since nuclear talks restarted in 2013, Western companies have visited Tehran in droves. Contractual tie-ups are now expected.

– Young tech-savvy market –

Iran already has online retailers, such as Digikala, and a domestic debit card system has shown the potential that can be unlocked when the barriers to international transactions come down.

As sanctions end, Iran will also gain access to modern technology and equipment previously deemed off limits that could transform its oil sector, manufacturing and other industries.

But for retailers it is the country’s young and technologically savvy population that has long-term potential — 56 percent are aged under 30 and most are avid users of the latest Western technology.

An unlocked iPhone 6, usually imported from Turkey or Dubai, can be bought for 28.5 million rials ($850) in Tehran — compared to $750 plus tax in the United States — but problems often start the moment it is switched on.

“We cannot pay for apps because of the sanctions, so it’ll be much better if they end,” said Sarah Derakshan, a 30-year-old English teacher, who relied on a friend in Canada to register an Apple Store account for her.

And one of her friends, whose iPhone bent after purchase, had a headache trying to get it repaired as he didn’t have an official Apple warranty.

“The shopkeeper charged him $100 for a domestic warranty but the insurance company said it wasn’t valid. Eventually, he had to sue the shopkeeper to get a new phone.”

Although some officials in Tehran play down the impact of sanctions, Rouhani’s government has admitted the damage caused and said only their removal can speed much-needed foreign investment.

In contrast, as sanctions stacked up on Rouhani’s predecessor, Mahmoud Ahmadinejad, Iran relied more and more on what was dubbed the “revolutionary economy”, of domestic production.

Iran’s economy grew by three percent last year, but with 25 percent of graduates unemployed and inflation still at 15 percent, the recovery remains vulnerable to low oil prices.

Recent years saw the economy reel after it was cut off from the SWIFT banking system of transfers in 2012, leaving Iranian businesses isolated from international finance.

When banking curbs are removed under the nuclear deal, Iranian firms — many of which have money frozen in foreign accounts — stand not only to get it back but also to benefit from easier transactions.