Iranian jobs go as US sanctions start to bite

London

TAMNOUSH, an Iranian company that makes fizzy drinks, has shut down its production line after 16 years and laid off dozens of workers. It was facing massive losses as US sanctions pushed up the price of imported raw materials.

The company's chief executive Farzad Rashidi said: "All our 45 workers are jobless now. The men are driving taxis and women are back to being housewives."

Reuters interviews with dozens of business owners across Iran show that hundreds of companies have suspended production and thousands of workers are being laid off because of a hostile business climate, caused mainly by the new US sanctions.

The Iranian rial has fallen to record lows; economic activity has slowed dramatically since US President Donald Trump pulled out from the big powers' nuclear deal with Tehran in May. He imposed sanctions directed at purchases of US dollars, gold trading, and the automotive industry in August. Iran's vital oil and banking sectors were hit in November.

Mr Rashidi said: "We have lost around five billion rials (US$120,000 at the official rate) in the last few months, so the board decided to suspend all activities for as long as the fluctuations in the currency market continue. It is stupid to keep driving when you see it's a dead end."

The country has already experienced unrest this year, when young protesters angered by unemployment and high prices clashed with security forces. Official projections indicate unrest could flare again as sanctions worsen the economic crisis.

Four days before parliament fired labour minister Ali Rabiei inAugust for failing to do enough to protect the job market from sanctions, he said Iran would lose a million jobs by year's end as a direct result of the US measures. Unemployment is already running at 12.1 per cent, with three million Iranians unable to find jobs.

A parliamentary report in September warned that rising unemployment could threaten the stability of the Islamic Republic.

"If we believe that the country's economic situation was the main driver for the recent protests, and that an inflation rate of 10 per cent and an unemployment rate of 12 per cent caused the protests, we cannot imagine the intensity of reactions caused by the sharp rise of inflation rate and unemployment." The report said if Iran's economic growth stays below 5 per cent in coming years, unemployment could hit 26 per cent.

The International Monetary Fund has forecast that Iran's economy will contract by 1.5 per cent this year and by 3.6 per cent next year due to dwindling oil revenues.

Iran's Vice-President Eshaq Jahangiri was quoted in state media as having warned that under the new sanctions, Iran faces two main dangers: unemployment and a reduction in purchasing power.

"Job creation should be the top priority ... We should not allow productive firms to fall into stagnation because of sanctions," he said.

But business owners told Reuters that the government's sometimes contradictory monetary policies, along with fluctuations in the foreign exchange market, price increases for raw materials, and high-interest loans from banks have made it impossible for them to stay in business. Many have been unable to pay wages for months or have had to shed significant numbers of workers.

The sanctions have also affected the Iranian car industry, which had experienced a boom with the lifting of the sanctions two years ago; big contracts were signed with French and German firms. Now, French carmaker PSA Group suspended its joint venture in Iran in June to avoid US sanctions; German car and truck manufacturer Daimler has dropped plans to expand its Iran business.

Maziar Beiglou, a board member of the Iran Auto Parts Makers Association, said that more than 300 auto parts makers have been forced to stop production; tens of thousands of jobs in the sector are at risk.

A spokesman for Iran's Tyre Producers Association blamed the government's "changing monetary policies over the last six months" for problems in the sector.

Washington says economic pressures on Tehran are directed at the government and its malign proxies in the region, not at the Iranian people. But Iran's young people, bearing the brunt of unemployment, stand to lose the most.Youth unemployment is already 25 per cent in a country where 60 per cent of the 80 million population is under 30.

The unemployment rate among young people with higher education in some parts of the country is above 50 per cent, according to official data.

Nima, a legal adviser for startups and computer firms, believes the sanctions have already hit many companies in the sector that depended on an export-oriented model and had hoped to expand in the region.

Saeed Laylaz, a Tehran-based economist, was more sanguine. He said youth unemployment was a product of Iran's demographics and government policies, and sanctions were only adding to an existing problem.

He said: "The sanctions, the uncertainty in the market and (President Hassan) Rouhani's zigzag policies have put pressures on the economy and the job market, but I predict that the market will find a balance soon. We will defeat this round of sanctions as we have done in the past." REUTERS