Iran’s entrepreneurs do business of a sort in face of sanctions
If Mohsen doesn’t come up with $100,000 by the end of the week, he’s a dead man.
Or so the seemingly well-to-do Tehran businessman says as he fidgets in his chair, inhales another Marlboro Light and adjusts his fitted sports jacket, his eyes darting nervously back and forth in the cafe as if he were being hounded by a ghost.
His company, he says, is a million dollars in the hole.
“Do you know where I can get a $100,000 loan?” he demands of a friend, only half in jest.
“No?” he replies to his own question, the word weighted with despair. “That’s it. I’m going to jail.”
The tale of Mohsen, a partner in a firm that exports petroleum products, goes some way toward explaining the economic conundrum of Iran, a land under heavy international economic sanctions yet managing to scrape by or, by some accounts, thrive.
For Mohsen, being broke doesn’t mean he isn’t continuing to travel abroad, drive a late-model car or treat himself to a swim at a private pool.
“Half of Iran’s businessmen are bankrupt,” he says with a smile. “How does a bankrupt business operate? With loans. With help from relatives.”
Mohsen asked that his last name not be published only for fear that his firm’s creditors would swoop in if they knew the dire state of his books.
“We’re all con artists and sellouts,” he says.
Experts have long puzzled over Iran’s contradictory economic indicators. How can prices for heavily subsidized gasoline continue to edge higher yet traffic jams only increase? How can unemployment figures remain so high but subways continue to be packed with ever-increasing mobs of passengers heading to work? How does a once prosperous middle class that constantly complains about lost purchasing power continue to crowd bazaars full of expensive imported goods, board planes heading to the Persian Gulf and Europe and buy ever fancier cars?
If Iran’s economy is under so much pressure, who was in the crowd mobbing the newly inaugurated Diesel store in north Tehran a few weeks ago, the first of about five branches of the Italian clothes retailer to open around the country?
A sort of Persian yuppie with a passion for writing and reciting poetry, the 44-year-old Mohsen embodies the angst and illustrates the maneuvering of a key class of people whose aspirations and values have been trampled by an up-and-coming religiously motivated political circle that has upturned domestic and international policies.
An economics graduate, Mohsen was a devoted environmentalist and health nut who hadn’t wanted to go into the petroleum business, which is Iran’s lifeblood. He emerged from college as an idealist full of business ideas. He tried to set up a plant to recycle plastics. But much of the equipment was made in the United States, and at the last minute a Malaysian reseller balked for fear of angering his American suppliers by dealing with Iranians.
He then sought to establish a business allowing Iran to take advantage of carbon credits, but found it impossible due to Iran’s lack of access to the international banking system because of the sanctions over its nuclear program.
So he gave up on his dreams and teamed up with a cousin to start a business selling gas and petroleum products overseas.
A few years ago, the self-described fitness aficionado, broad-shouldered, slim and with white strands flecking his full head of dark hair, began chain-smoking.
“I’m a criminal,” he says, with an air of self-pity. “This system makes you betray everything.”
Starting with the ascent of former President Ali Akbar Hashemi Rafsanjani in 1989, the middle class — a huge swath of Iran that includes businesspeople, professionals, civil servants and underemployed, over-educated men and women in their 20s — was officially favored by Iranian policymakers. Indeed, business was great back then, Mohsen says. The private sector was given space to grow. Foreign companies were encouraged to invest.
But then came the 2005 election of hard-liner President Mahmoud Ahmadinejad, whose politics have trumped business concerns.
Ahmadinejad and his clique espoused a version of class warfare pitting the poor against so-called fat cats. They began throttling Iran’s private sector by redirecting business contracts toward trusted allies close to the Revolutionary Guard, an elite branch of the military. They’ve also begun removing subsidies that help all Iranians, retargeting them so as to cater to their religiously observant rural political base.
Doing business began getting difficult for Mohsen. The government and businesses close to it began taking over the most profitable portions of petroleum product sales, leaving only a few scraps for independent businesses.
“The government is now our main competition,” he says.
In addition, Tehran’s foreign policy has made it all but impossible to sell abroad.
About a year ago, Mohsen’s company purchased a large quantity of gas condensate, a byproduct of natural gas used in industry, from a government firm, which insisted on cash up front.
His company secured a buyer overseas on condition that a sample be examined before the sale was completed. Lacking the clout to obtain a loan from any bank, Mohsen’s company instead turned to two businessmen who lent it money on condition that each received a fixed share of the profit.
“There’s two ways to get a bank loan in this country,” he says. “There’s a legal way — that’s almost impossible — and then there’s people who have connections.”
Unfortunately, the foreign buyer rejected the sample as not being up to its standards, and Mohsen’s firm found itself stuck with a huge supply of gas condensate. The company rented storage space but its costs kept getting higher. It approached more financiers to cover the added expenses.
About a year later, they finally managed to sell the shipment at a steep loss and paid off their creditors, but only by borrowing more money.
The key, Mohsen explains, is that you have to keep moving. You have to keep showing that you’re busy and have money, that you can afford spiffy threads and an eye-catching car. Because if a creditor sees that you’re not making ends meet, and that you’re cancelling the annual vacation or selling off the fancy car, he’ll deduce that you’re about to go bankrupt. And then, he’ll swoop in before other vultures to salvage what he can.
“If the creditor knows you have some money, and your company is operating, then he’s relaxed,” he says. “But if they find out you’re in over your head, you’re dead. Each creditor will fear that the other creditors will step in first.”
Iran’s central bank announced in October that checks worth $10 billion had bounced in the first five months of the Iranian calendar year, which began March 21. Iran’s prisons are full of men like Mohsen, who played the game and lost.
Staying in the game is getting more expensive for the Iranian businessman. News outlets hostile to the government regularly report increases in the price of basic goods. Merchants in the Tehran bazaar say they’ve raised them 10% or more in the last couple of months to keep pace with costs.
Mohsen says Iran’s business environment is heaven for those who have abundant cash reserves. Like predatory lenders in the United States, they lend money on usurious terms, then pick up the pieces of collapsing businesses and live on the cheap.
Upon reflection, he is full of regret for the path he has chosen.
“If I could do it all over again,” he says, “I’d be an orchestra leader.”
During lunch at an upscale Tehran restaurant, Mohsen recites a poem he has composed:
“What a feast of mourning and sadness when the shepherd and wolf are sitting at tablecloths where my flesh is their foodstuff. The shepherd in collusion with the wolf played his flute while deceivingly warning, ‘Wolf! Wolf!’ A fake warning, as indeed I was the victimized sheep.”
He continues,"But how can I complain, when it was I who made the idol, and the idol made me, his creator and his prey?”
After settling the lunch bill, he again turns to a friend. “Do you know where I can get a $100,000 loan by the end of the week?” he asks. “Seriously, do you know?”
Special correspondent Ramin Mostaghim in Tehran contributed to this report.