Iranian jobs disappear under US sanctions

LONDON (Reuters) – Tamnoush, an Iranian company that produces soft drinks, shut down its production line after 16 years and fired dozens of workers. It faced massive losses as US sanctions pushed up the price of imported raw materials.

"All of our 45 workers are unemployed now. Men are driving taxis and women have become homemakers again, "said CEO Farzad Rashidi.

Reuters talks with dozens of business owners across Iran show that hundreds of companies have suspended production and that thousands of workers are fired because of a hostile business climate caused mainly by new sanctions imposed by the United States.

The Iranian rial has fallen to record levels and economic activity has slowed considerably since US President Donald Trump withdrew from the nuclear deal reached between the major powers and Tehran in May.

He imposed sanctions on purchases of US dollars, the gold trade and the auto industry in August. Iran's vital oil and banking sectors were hit in November.

"We lost about five billion rials ($ 120,000 at the official rate) in recent months. As a result, the board has decided to suspend all of its activities as long as currency market fluctuations continue. It's stupid to continue driving when you see that it's a dead end, "Rashidi said.

The country has already been troubled this year when young demonstrators dissatisfied with unemployment and high prices clashed with the security forces. According to official projections, unrest could again occur as sanctions aggravate the economic crisis.

Labor Minister Ali Rabiei said that Iran would lose a million jobs by the end of the year, four days before the European Parliament dismissed him for the month of April. Because of the measures taken by the United States.

Unemployment already reaches 12.1%, with three million Iranians unable to find a job.

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

"If we think that the economic situation of the country has been the main driver of the recent protests and that an inflation rate of 10% and a 12% unemployment rate have provoked these protests, we can not imagine the intensity of the reactions caused by the sharp rise in the rate of inflation and unemployment. "

The report says that if Iran's economic growth remains below 5% in the coming years, unemployment could reach 26%.

According to forecasts by the International Monetary Fund, the Iranian economy will shrink 1.5% this year and 3.6% in 2019 due to lower oil revenues.

Producers struggle

The Iranian vice president warned that under sanctions, Iran faced two main dangers: unemployment and a reduction in purchasing power.

"Job creation should be the top priority … We should not let productive companies stagnate because of sanctions," Eshaq Jahangiri said, according to official media reports.

But business owners told Reuters that the government's sometimes contradictory monetary policies, along with currency market swings, rising commodity prices, and high-rate borrowing from banks, kept them from staying in business. business.

Many of them have not been able to pay their salaries for months or have had to lay off a significant number of workers.

A senior official at Jolfakaran Aras, one of Iran's largest textile factories, told Reuters that the company was planning to shut down and that hundreds of workers could lose their jobs.

"About 200 workers were fired in August and the situation has worsened since. There is a good chance that the factory will close, "said the director, asking not to be named.

Ahmad Roosta, CEO of Takplast Nour, hoped that a drought in Iran would give a boost to his new plant, which produces plastic pipes used in agriculture.

"I will wait one or two months, but I will have to close if the situation remains the same … Farmers, who are the main consumers of our products, can not afford to buy them", Roosta told Reuters.

The sanctions hit the Iranian auto sector, which had grown after sanctions were lifted two years ago and had signed large contracts with French and German companies.

French car manufacturer PSA Group (PEUP.PA) suspended its joint venture in Iran in June to avoid US sanctions, and the German car and truck manufacturer Daimler abandoned its plan to expand its operations in Iran.

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

A spokesman for the Iran Tire Manufacturers' Association criticized the government's "changing monetary policy over the past six months" for the sector's problems.

"Fortunately, tire factories have not slowed down, but the growth in production we planned has not been achieved," said Mostafa Tanha in a telephone interview with Tehran.

UNEMPLOYMENT IN YOUNG PEOPLE

Washington said economic pressures on Tehran targeted the government and its proxies in the region, not the people of Iran. But the Iranian youth, most affected by unemployment, may lose the most.

Maryam, public relations manager at a food import company, lost her job last month.

"Prices have become so high that we have lost many customers … Finally, the CEO decided to fire employees and started with our department."

She added that the company had stopped importing and that people who were still working there feared that it would close after selling its inventory.

Youth unemployment is already 25% in a country where 60% of the population of 80 million is under 30 years old.

According to official data, the unemployment rate of young graduates of higher education in some parts of the country exceeds 50%.

Armin, 29, is a mechanical engineer and lost his job in the construction industry when the sector was hit by the recession that followed the fall of the rial.

"The real estate market is slowing down because high prices make homes unaffordable … it is getting worse by the day," he told Reuters, a native of Rasht city in northern Iran. .

Nima, a legal advisor to startups and IT companies, says the sanctions have already affected many companies in the sector that were based on an export – oriented model and hoped to expand in the region.

He added that even the Iranian gambling industry had felt the consequences of the sanctions: "The situation has become so critical that many of these teams have decided to suspend the development of their games and are waiting to see what will happen next. . Without access to international markets, they see little chance of making a profit. "

Saeed Laylaz, an economist based in Tehran, was more optimistic. He said that youth unemployment was a product of Iranian demography and government policies, and that sanctions only added to an existing problem.

"Sanctions, market uncertainty and Rouhani's zigzag policies have put pressure on the economy and the labor market, but I predict that the market will soon find a balance," Laylaz told Reuters.

"We will cancel this round of sanctions as we have done in the past," said Laylaz, who met Rouhani last month with other economists to give advice on economic policies.