Merchants bring down shutters in Tehran bazaar after clashes

Iran blames economic "conspiracy" as price rises loom Fri, Oct 05 10:38 AM EDT By Marcus George DUBAI (Reuters) - Iran will defeat a "conspiracy" against its foreign currency and gold markets, an adviser to supreme leader Ayatollah Ali Khamenei said on Friday, as pressure mounts on authorities to deal with the rapid collapse of the rial. Riot police fought demonstrators and arrested money changers in and around the Tehran bazaar on Wednesday during protests triggered by the fall of the Iranian currency, which has lost a third of its value against the dollar over the last ten days. Protesters called President Mahmoud Ahmadinejad a traitor because of what many say is his serious mismanagement of the economy, which has also been badly hit by U.S.-led Western sanctions imposed over Iran's nuclear program. But there has so far been no public criticism of Khamenei, the Islamic Republic's most powerful authority. "Iran is overcoming the psychological war and conspiracy that the enemy has brought to the currency and gold market and this war is constantly fluctuating," Gholam Ali Haddad Adel, a close ally of Khamenei, Fars news agency reported him as saying. "The arrogant powers, in their crude way, think that the nation of Iran is ready to let go of the Islamic revolution through economic pressure but we are establishing Iran's economic strength," he said. The fall in the rial over the past year has been caused by economic mismanagement and sanctions, a U.S. official said. Iran could relieve the pressure if it resolves concerns about its nuclear work, David Cohen, undersecretary for terrorism and financial intelligence at the U.S. Treasury, said in London. "The Iranian leadership has within its capacity the ability to relieve the pressure its people are feeling," he said. Ayatollah Ahmad Khatami, a hardline cleric, called on the various branches of government to work together to solve the country's economic problems. "It is expected that the authorities solve the problems with empathy. Treating the pain will solve the problem, not apportioning blame," he said in a sermon at Friday prayers. Most of the bazaar was shut on Thursday, but business associations said it would reopen on Saturday under the supervision of the security forces. It is traditionally closed on Fridays. Analysts say any further discontent could spread quickly if it is allowed to gain a foothold. The bazaar, whose merchants were influential in bringing an end to Iran's monarchy in 1979, wields significant influence and this week's unrest is a clear signal that the economic hardship is having a profound effect on businessmen and residents alike. "EVERYTHING SO EXPENSIVE" "I have a good salary and I can still afford the shopping and expenses for my family," Ali, 42-year-old Iranian engineer, told Reuters by telephone. He earns $1,000 a month. "But everything has become so expensive and so difficult for people. I'm just glad I have a job." This week's plunge in the rial has had a small but noticeable impact on groceries and Ali fears more price rises are imminent. "Eggs, milk, cheese, infant formula, cooking oil, rice and beans have all increased over the last six days," Kia, a Tehran-based blogger, wrote in an email. "I've seen people buying lots of food and some of them are stockpiling," said Kia, alluding to further rises on the way. The cost of food and fuel has shot up in the last year as rampant inflation has taken hold. Iranians now pay nearly three times more for chicken and red meat than a year ago. Farmers say they are forced to pass on the increased costs of animal feed and vaccines, which are often imported and directly affected by the fluctuations in the exchange rate. The rial's losses have accelerated despite the government's attempts to stem the slide by setting up an "exchange center" designed to supply dollars to importers of some basic goods at a special rate, slightly cheaper than the market rate. Instead of allaying fears about the availability of dollars, the center seems to have intensified the race for hard currency. "This is a very serious situation. There is a lot of pressure on Khamenei to remove Ahmadinejad but they will need to find a way to do it without losing face," said Iranian-born Mehrdad Emami, an economics adviser to the European Union. "Ahmadinejad is pushing ahead and that could create continuing unrest which will need a lot of security on the streets," he added. Iran's leaders could stabilise the currency if they take the right decisions, say analysts. Foreign currency reserves, though depleted, are still enough to prop up the rial. (Additional reporting by William Maclean; Editing by Giles Elgood) =========== Top News Merchants bring down shutters in Tehran bazaar after clashes Thu, Oct 04 09:26 AM EDT By Marcus George and Yeganeh Torbati DUBAI (Reuters) - Shops in Tehran's Grand Bazaar stayed shut and police patrolled the area on Thursday as authorities struggled to restore normalcy a day after security forces clashed with anti-government protesters angered by the collapse of the currency. Traders from the bazaar, whose merchants supported Iran's 1979 Islamic revolution, told Reuters by telephone that most stores were closed because their owners had stayed away for safety reasons. On Wednesday, riot police scuffled with demonstrators and arrested money changers in the area during protests triggered by the plunge of the Iranian rial, which has lost about a third of its value against the dollar over the past 10 days. Pressure on President Mahmoud Ahmadinejad mounted as business associations blamed him for much of the country's economic crisis, which has been fuelled by Western sanctions imposed over Iran's disputed nuclear program. Associations representing production, distribution and service sectors said Ahmadinejad's administration had devastated the economy with mistaken policy decisions, the semi-official Mehr news agency reported on Thursday. But in a sign that the protests still do not threaten Iran's Islamic system of government or Supreme Leader Ayatollah Ali Khamenei, a statement by the associations stressed that "they continue to adhere to the system and the revolution", Mehr said. The associations agreed that the Grand Bazaar, one of the capital's main shopping areas, would reopen on Saturday in the presence of security forces, Mehr reported. Ahmadinejad also came under fire from enemies in parliament. The head of parliament's committee for social affairs, Abdulreza Azizi, criticized him for insisting that currency speculators, not his own government's policies, had caused the rial's tumble. EXPORTS SLASHED The rial has lost about two-thirds of its value against the dollar since June last year as the sanctions have slashed Iran's earnings from oil exports. The currency's losses have accelerated in the past 10 days after a failed government attempt to stabilize it with a new foreign exchange centre. The slide has cut living standards, forced Iran to reduce its imports and fuelled job losses in the industrial sector. It has also boosted inflation, which Steve Hanke, an economics professor at Johns Hopkins University in the United States, said had now become hyperinflation. The government officially puts the annual inflation rate at around 25 percent but Hanke estimated that in the past 10 days, prices in Iran had started rising at a rate which would mean 50-60 percent inflation in a single month. This is "throwing a monkey-wrench into the stability of the economy. Iran is really getting buffeted around," he said. One single parent contacted by Reuters in Tehran said she had been unable to buy meat for her two small children for the past two months because of soaring prices. An elderly resident said pharmacies in the city had stopped stocking his German medicine for Alzheimer's disease a few weeks ago. The residents declined to be named because of political sensitivities. Free-market trading in the rial appears to have almost ground to a halt because of the immense volatility and the government's assault on money changers, traders said. Iranian media reported that Ahmadinejad had met economic ministers on Wednesday and issued orders on controlling the currency market, but they did not say what those orders were. POLITICS Hanke said that if the government was determined to ride out the economic turmoil, it could probably do so for some time. But the involvement of the bazaar in this week's demonstrations could signal a change of political wind in Tehran. Merchants there and in other major cities were largely absent in the pro-democracy protests that followed Ahmadinejad's disputed re-election in 2009. "Up to now, the bazaar has been a bulwark of support for the state," said Shaul Bakhash, an Iran historian at George Mason University in the United States. The protests, he said, "could be signs that the merchant and shopkeeper community have lost patience with the government and its handling of the dollar crisis the country is facing." Some analysts therefore think Khamenei could reshuffle the government to placate public opinion - and conceivably allow Ahmadinejad's old rival Akbar Hashemi Rafsanjani, known as a pragmatist, to regain influence. Ahmadinejad has been greatly weakened after a public dispute with Khamenei last year and by law cannot run again for president in elections scheduled for June 2013. If the government can find ways to deploy its financial resources more effectively, it has a good chance of stabilizing and even strengthening the rial, some analysts believe. (Additional reporting by Zahra Hosseinian; Writing by Andrew Torchia; Editing by Giles Elgood) Email Article Next Article in Top News Home » Top News Search | Quotes | Videos | Currency | Slideshows | Top News | Oddly Enough | Business | Entertainment | Sports | Deals | Hot Stocks | Technology | Politics | More Categories =========================