Sanctions Pull Rug From Under Iran

Monday, 18 October, 2010

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Jason Rezaian

Iran’s famed rug industry faces a serious threat from the latest sanctions imposed by the United States, the biggest market for Persian carpets.

The embargo came into force on September 29, coinciding with the final day of a week-long international carpet exhibition in Tehran at which insiders mulled the future of the trade.

Figures released by the Iranian government in early September painted a healthy picture, estimating that rug exports could reach a value of half a billion US dollars in the current Iranian year, running from March to March. That was a reasonable enough projection given that data for the five months since March 2010 showed receipts of 207 million dollars, nearly 50 per cent up on figure for the same period last year.

However, what the estimate fails to into account is the US ban on Iranian products including luxury items like handmade carpets, part of the latest sanctions that Washington authorised in July. US purchases account for 20 per cent of Persian carpet exports.

Speaking on September 20, the US Treasury Department’s undersecretary for terrorism and financial intelligence, Stuart Levey, said measures imposed by the US and other governments were imposing “serious costs and constraints” on Iran.

Levey said the latest sanctions specifically targeted those doing business with the Iranian Revolutionary Guards Corps, but it is hard to see how this applies to carpet-weaving.

Around two million jobs in Iran are in some way connected to the production and trading of handmade rugs. Adding their dependents, this translates into one in ten of Iran’s population. It is still too early to estimate what impact the loss of the US market will have on the livelihoods of so many people, but many Iranians are understandably beginning to ask why they should lose out so badly if the sanctions are meant to be against their government.

“We’re wondering why the American government would do this,” Mohammad Mehdizadeh, who comes from the renowned carpet-weaving city of Kerman and was exhibiting his wares at the international fair in Tehran. “These sanctions will only affect people in the trade. What connection does the rug business have with politics?”

Persian carpet imports to the US were banned for most of the 1980s and all of the 1990s – with very limited success, according to a veteran merchant in the San Francisco Bay area.

“The last US embargo spawned a great frenzy of attempting to circumvent the blockade, by importing rugs into the US via the border with Canada. Some dealers were successful and made money; others were apprehended, arrested, tried and served prison time,” he said.

Mehdizadeh, too, recalled the contraband days. “I did sent rugs during [President Ronald] Reagan’s time. We’d send them to Germany and then on to Canada, where they’d be loaded into small trucks and taken over the border at night,” he said.

In its final months, President Bill Clinton’s administration made an apparent goodwill gesture by introducing a special exemption for Persian carpets as well as caviar, pistachio nuts and dried fruits.

The immediate result was a glut on the US market, and even now there are large stocks of unsold Iranian rugs sitting in warehouses across America.

Nevertheless, sales have remained strong enough for the US to remain the number one destination for this finely-woven, colourful handicraft.

Those days are now numbered.

President Barack Obama has held out the promise of a better trade relationship if Tehran decides to cooperate with the international community on the long-running dispute over uranium enrichment.

But this time, the decision to lift sanctions may not be one that Obama can make. According to Jamal Abdi, policy director at the National Iranian American Council in Washington, “with the reinstated ban on rugs and pistachios, Congress intentionally reversed the ‘goodwill gestures’ of the Clinton administration. Under the new sanctions, the president has significantly less authority on these matters, meaning it will be far more difficult for President Obama or any US president to offer similar gestures of goodwill in the future.”

If rug exporters in Iran were taken by surprise, traders in America had in fact been anticipating the move for some time.

“This time dealers were aware this action was coming. Many had been expecting it for years,” the San Francisco merchant said. “Some of them had been attempting to bring Persian rugs into the country legally before the embargo went into effect.”

Thus, the true beneficiaries of the ban on Persian carpets may be those who sell them, as scarcity helps boost demand.

Jason Rezaian is a journalist based in Tehran, and formerly involved in the rug trade.