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| As Iranian market opens, curtain falls on a once-thriving underground economy | |
| (about 7 hours later) | |
| Men sit on motorcycles and wooden benches at Afshar, Tehran’s informal currency exchange hub. Gripping tight fistfuls of dollars and euros, they wait impatiently in the summer heat for customers looking to buy or sell foreign cash. During the final years of Mahmoud Ahmadinejad’s presidency, when sanctions and political uncertainty fueled the black currency market, the brokers at Afshar could shake up the country’s turbulent economy in a single day of trading. But after the nuclear deal and the success of President Hassan Rouhani’s efforts to stabilize the rial, these speculators are bracing for the end of an era. | Men sit on motorcycles and wooden benches at Afshar, Tehran’s informal currency exchange hub. Gripping tight fistfuls of dollars and euros, they wait impatiently in the summer heat for customers looking to buy or sell foreign cash. During the final years of Mahmoud Ahmadinejad’s presidency, when sanctions and political uncertainty fueled the black currency market, the brokers at Afshar could shake up the country’s turbulent economy in a single day of trading. But after the nuclear deal and the success of President Hassan Rouhani’s efforts to stabilize the rial, these speculators are bracing for the end of an era. |
| The small but frenetic market rose to nationwide notoriety in 2012, when a new wave of sanctions on Iran’s oil sector drove down the value of the rial. Subsequently, Ahmadinejad’s government implemented a three-tiered exchange rate in a populist effort to stabilize the cost of staple imports while raising the price of luxury products. These developments encouraged black-market speculation. Afshar, where much of the illicit trading took place, became the target of police raids. The governors of Iran’s Central Bank, which lost much of its political independence under Ahmadinejad, complained regularly about Afshar’s negative impact on the already fluctuating value of the national currency. | The small but frenetic market rose to nationwide notoriety in 2012, when a new wave of sanctions on Iran’s oil sector drove down the value of the rial. Subsequently, Ahmadinejad’s government implemented a three-tiered exchange rate in a populist effort to stabilize the cost of staple imports while raising the price of luxury products. These developments encouraged black-market speculation. Afshar, where much of the illicit trading took place, became the target of police raids. The governors of Iran’s Central Bank, which lost much of its political independence under Ahmadinejad, complained regularly about Afshar’s negative impact on the already fluctuating value of the national currency. |
| Many of those involved in the informal trade at Afshar are in fact employees of the official currency exchange outlets along Ferdowsi Street. They bring leftover foreign currency to the market, selling them at discount rates for commission. “If they’re smart, they work with good exchange outlets, and they’ll easily make 150 million rials ($5,000) a month,” said a trader who identified himself as a securities expert. | |
| But Amin, who studied engineering and has been working at Afshar for three years, said he makes 30-40 million rials (around $1200) on a good month - three times the average salary of an electrical engineer. He recalls the heady days of the Ahmadinejad presidency, when controversial political statements had direct impact of exchange rates. | But Amin, who studied engineering and has been working at Afshar for three years, said he makes 30-40 million rials (around $1200) on a good month - three times the average salary of an electrical engineer. He recalls the heady days of the Ahmadinejad presidency, when controversial political statements had direct impact of exchange rates. |
| Related: Rouhani tries to get Iranians to pay their taxes | Related: Rouhani tries to get Iranians to pay their taxes |
| “All [Ahmadinejad] had to do was open his mouth and the price of the dollar would go up and down 1,000 rials. The market was all over the place. Ahmadinejad and the Revolutionary Guards actually wanted the price of the dollar to rise because they would sell oil for dollars. Then they would sell those dollars at the higher rates on the market and get more rials. And we would benefit from this process. But this Rouhani, who talks far less crap, has caused our business to slacken a bit.” | “All [Ahmadinejad] had to do was open his mouth and the price of the dollar would go up and down 1,000 rials. The market was all over the place. Ahmadinejad and the Revolutionary Guards actually wanted the price of the dollar to rise because they would sell oil for dollars. Then they would sell those dollars at the higher rates on the market and get more rials. And we would benefit from this process. But this Rouhani, who talks far less crap, has caused our business to slacken a bit.” |
| Currency and gold coin exchange stores line a roughly 300-meter stretch on the left side of Manouchehri Alley, near central Tehran’s Ferdowsi Square, where some 300 people cram together in the middle of the street, shouting as they exchange currencies. At the end of each trading day at 1.30-2pm, an insider group of runners updates the crowd on the current official exchange rate, and the traders start to haggle with potential clients. Yelling is the standard delivery method of currency rates at this market, and cash-rich members of the crowd can get deep discounts. On 25 July, they descended on a young man attempting to buy 25,000 euro for under 36,250 rials per euro, or 150 rials below the rate. “Either you wanna buy or you don’t. I won’t budge, even for one rial,” an elderly man told him. | Currency and gold coin exchange stores line a roughly 300-meter stretch on the left side of Manouchehri Alley, near central Tehran’s Ferdowsi Square, where some 300 people cram together in the middle of the street, shouting as they exchange currencies. At the end of each trading day at 1.30-2pm, an insider group of runners updates the crowd on the current official exchange rate, and the traders start to haggle with potential clients. Yelling is the standard delivery method of currency rates at this market, and cash-rich members of the crowd can get deep discounts. On 25 July, they descended on a young man attempting to buy 25,000 euro for under 36,250 rials per euro, or 150 rials below the rate. “Either you wanna buy or you don’t. I won’t budge, even for one rial,” an elderly man told him. |
| No one actually comes to the market wielding suitcases of cash. “If someone has a lot of dollars to sell, they can register their name and come the following day, first thing in the morning, to make the sale at that rate,” said one small-time trader, his pockets stuffed with cigarettes and foreign bills. “At the end of the day, the brokers will sell and buy dollars at specified rates to get them to the market the next day. They get a little commission, and the price of the dollar for the next day is determined.” | No one actually comes to the market wielding suitcases of cash. “If someone has a lot of dollars to sell, they can register their name and come the following day, first thing in the morning, to make the sale at that rate,” said one small-time trader, his pockets stuffed with cigarettes and foreign bills. “At the end of the day, the brokers will sell and buy dollars at specified rates to get them to the market the next day. They get a little commission, and the price of the dollar for the next day is determined.” |
| The looming threat of legal repercussions for underground trading has ended the wild speculation of the Ahmadinejad years. This February, Central Bank vice governor Gholamali Kamyab told the pro-state news wire Tasnim that any buying, selling, or price-setting on behalf of the brokers would be considered illegal. According to the new rules, brokers must register all of their transactions in a sophisticated tracking system. The Iranian foreign currency exchange association must account for the average exchange rates for transactions during the work day and publish them on its website to calculate the official exchange rate for that day. Kamyab also said that the new rules would allow municipal police to arrest the brokers on Ferdowsi Street. | The looming threat of legal repercussions for underground trading has ended the wild speculation of the Ahmadinejad years. This February, Central Bank vice governor Gholamali Kamyab told the pro-state news wire Tasnim that any buying, selling, or price-setting on behalf of the brokers would be considered illegal. According to the new rules, brokers must register all of their transactions in a sophisticated tracking system. The Iranian foreign currency exchange association must account for the average exchange rates for transactions during the work day and publish them on its website to calculate the official exchange rate for that day. Kamyab also said that the new rules would allow municipal police to arrest the brokers on Ferdowsi Street. |
| Six months after Kamyab’s announcement, Afshar market remains operational, kept alive mostly by the micro transactions of Tehranis seeking to fund their foreign travels. “Nowadays it’s nothing like the abundance of the past, because the market has consolidated a lot,” said the securities expert. “There’s still good profit, though.” | Six months after Kamyab’s announcement, Afshar market remains operational, kept alive mostly by the micro transactions of Tehranis seeking to fund their foreign travels. “Nowadays it’s nothing like the abundance of the past, because the market has consolidated a lot,” said the securities expert. “There’s still good profit, though.” |
| At 2.30pm, when the market begins to slow down, brokers muse about the future of Afshar in the aftermath of Iran’s nuclear deal and the lifting of international sanctions. “The nuclear deal will bring some stability to the market,” says Morteza, who sports a hands-free mobile headset. He predicts the release of the estimated $23 billion frozen in Iran’s foreign bank accounts will strengthen the rial. But the value of the dollar won’t drop further than 4,000 rials below the government rate of 29,000, he adds. | |
| “We all know that this market isn’t going back to its golden days,” he quips. “We’re just giving it our last push here. After this year, we all need to start thinking about new jobs.” | “We all know that this market isn’t going back to its golden days,” he quips. “We’re just giving it our last push here. After this year, we all need to start thinking about new jobs.” |
| The article was amended to correct a typo in one conversion. |