Iran International
Industry critics say a “mafia-like” influential group is behind a ban on car imports to eliminate competition to Iran's auto industry where their interests lie.
In an interview with Bazaar website on Monday, Mehdi Dadar, secretary of car importers' association, said buyers in the Iranian market are critical of a ban on importing cars behind which, he alleged, lies a 'mafia group', as authorities do nothing to correct the situation.
Dadar accused policymakers of indirectly supporting Chinese auto parts manufacturers and turning the industry into "assemblers of Chinese parts". He alleged that powerful importers of car parts are behind government opposition to importing cars.
Iran's quasi-government automotive industry, the county’s largest after oil and gas, employs 700,000 workers. Iran annually makes nearly 1.5 million vehicles. The sector is in debt for billions of dollars and is a large burden for the government and its banks.
The issue of the ban on car imports introduced in 2018 became very controversial last week when lawmakers realized that their approval for the government to provide foreign currency to importers for 70,000 cars had been eliminated from the budget from the budget.
During their debate over the budget earlier, lawmakers had agreed to the government's plan to allow importing 70,000 cars in the next 12 months to augment tax revenues. The budget bill, however, set a condition that the cost of the imported cars would not exceed 25,000 per unit.
According to the official news agency IRNA, the omission was made with the knowledge of the parliament's presidium and Speaker Mohammad-Bagher Ghalibaf because they knew the constitutional watchdog, the Expediency Council would oppose it.
Critics, however, say that the Expediency Council and another watchdog, the Guardian Council, should not have intervened in a practical matter, and allege outside influences played a role in the interference.
Minister of industries, mines, and trade, Reza Fatemi-Amin, on March 13 claimed that the ban on car imports was a consequence of shortage of foreign currency rather than a measure to support domestic producers and the ban would be lifted soon.
Iran Khodro and Saipa, the two largest automakers, have a monopoly in the Iranian market.
Critics say by protecting automakers' interests in many ways, including by eliminating foreign competitors, successive Iranian administrations have become complicit in putting innocent people's lives in danger.
Road Police officials have repeatedly warned about inadequate safety standards of domestic cars. Speaking to the Iranian Students News Agency (ISNA) in October, Deputy Chief of Iran's traffic police, Brigadier-General Taymour Hosseini said road accidents were occurring due to inadequate safety standards as Iranian companies struggled to keep up with cost and parts sourcing. "Big companies in the world are working on intelligent cars but we have dropped our expectations so much that we are happy with having anti-lock braking systems,” he said.
In an interview on March 24 with Hamshahri Online, chief of Iran's road and traffic police, Brigadier General Kamal Hadianfar, criticized manufacturers for importing car parts from China, saying there is no effective quality control in the industry.
After two massive vehicle collisions involving tens of cars in southwestern Iran in January during which the cars' airbags failed to open, Hadianfar called domestically produced cars "carriages of death".
Ali Salehabadi, appointed by President Ebrahim Raisi last year to head the CBI, said on Monday that from March 21, 2021, until March 20, 2022 (the Iranian year 1400) the government dispensed $57 billion to individuals and businesses, a 57-percent rise compared with the previous 12 months.
The foreign currency market is largely controlled by the government, except a black market, where people can buy and sell hard currencies. The size of this unofficial market is hard to estimate, since transactions are off the books and deliberately hidden.
In Iran’s centralized economy and banking system the government has been controlling the large transactions, through evolving regulations in the past 43 years since the Islamic Republic was established.
Businesses can always buy dollars in the black market or through official channels after receiving the necessary approvals, but the government has to inject the hard currency, either through its official banking system or the black market, to finance imports and prevent a run on the national currency.
If the figure Salehabadi announced is true, it means the Islamic Republic had at least $20 billion more at its disposal in the past 12 months for making available $57 billion for imports and other needs, such as foreign travel and stipends for students abroad – not mentioning capital flight from the country.
Part of the available hard currency invariably leaves Iran in the form of individuals taking their money into safer markets, such as Turkey, the United Arab Emirates or Western countries.
Again, if Salehabadi’s claim is true, it means Iran earned $20 billion more during March 2021-March 2022, presumably from higher oil exports, banned by United States’ sanctions that are increasingly circumvented by Tehran.
There have been numerous reports since late 2020 that Iran has been selling more oil, clandestinely, mainly to China at cheaper prices. Iranian shipments have increased from as low as 200,000 barrels per day in 2019 to as high as more than one million barrels in late 2021.
The question is why the US has not tried harder to enforce its sanctions.
President Joe Biden decided to rejoin the 2015 Iran nuclear agreement that his predecessor abandoned in May 2018, which meant he would lift sanctions if an agreement could be worked out with Iran to mutually revive the deal known as the JCPOA. One of his first foreign policy actions was the start of multilateral talks in Vienna a year ago, and it appears that the administration decided not to go out of its way to enforce the economic sanctions.
China and others might have also calculated that Washington would not make a fuss about sanctions violations amid nuclear talks, which also involved Moscow and Beijing.
The result has been considerably higher oil income for Iran, that some argue has made Tehran confident enough not to have agreed to a deal in Vienna after 12 months of talks, and lately demanding more concessions from the United States.
Although more dollars flowed into Tehran’s coffers in recent months, the Iranian currency has remained weak, having lost its value eightfold since the beginning of 2018. One US dollar now buys 270,000 rials, compared with 34,000 in 2017, before the US imposed sanctions.
The reason for a lack of improvement for the rial, or in the case of a 40-percent annual inflation rate, could be the depth of the economic crisis gripping the country. A mere $20 billion cannot quickly make a dent in the inefficient economy, burdened by tens of billions of dollars of energy subsidies energy and military, ideological overhead.
Despite the additional income, Iran is by no means out of the woods. Any tightening of sanctions can erode the gain in oil exports and return the situation to the pressures of 2019.