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EghtesadOnline: Iran’s auto industry has been in a state of tumult ever since the hawkish US President Donald Trump reneged on the historic 2015 nuclear deal, creating economic uncertainty in the country as baffled Iranians saw the dollar exchange rate and prices of many goods including vehicles hit unprecedented highs. Since then, Iranian authorities and carmakers have rushed in to mitigate the damage caused by Trump’s underhand move.

The move jeopardized local carmakers’ joint ventures with their French partners and prompted the government of President Hassan Rouhani to ban car imports indefinitely to save the dwindling foreign currency reserves from depletion.

To calm the waters, Industries Minister Mohammad Shariatmadari held a news conference on the occasion of National Mine and Industries Day on Saturday to address several issues on the mind of the public in regard with the key auto sector, ISNA reported.

The air was fraught with questions in the conference hall as the minister discussed the hot topics of the day one by one, according to Financial Tribune.

One of the issues that have been pushed into the limelight lately has been regulating the mechanism of providing manufacturers and importers with subsidized foreign currency.

Currently, the US dollar changes hands at the unprecedentedly high rate of over 85,000 rials in Tehran’s gray market, while the government has been providing some firms with the greenback at the rate of 42,000 rials. Prices have soared regardless, triggering public demand for more transparency.  

In order to make the mechanism of allocating the subsidized currency transparent, many have called on the government to release the names of the recipients. During the conference, Shariatmadari chose a controversial response over the matter.

Slightly dodging the question, the minister told reporters that he “refuses to reveal the names of those who have placed import orders.” In order to receive the subsidized currency firms first need to place an import order with the government. 

Shariatmadari went so far as to call the policy ill-conceived describing it much the same as “declaring an onslaught on the private sector.” He asserted that publishing the list would “destabilize the market.”

 Falling in Line

As the day went by, it became obvious that Shariatmadari had started a game he was about to lose. 

Another member of Rouhani’s Cabinet, ICT Minister Mohammad Javad Azari-Jahromi took to Twitter to criticize the adverse comments by Shariatmadari.

The young minister used segments of Shariatmadari’s speech to oppose his stance. He wrote that “it is corruption that destabilizes the country’s economy” and that “we must fight rent-seeking behaviors.”

President Rouhani signaled his support for Azari-Jahromi’s stance with a slight digital nod by liking his Tweet via his verified account on the social media platform.

Seemingly Rouhani’s support for Azari-Jahromi’s comments reminded Shariatmadari that he is violating a direct presidential order to disclose the name of all recipients of 42,000-rial dollars.

Later in the day, Shariatmadari retracted and fell in line with the general atmosphere in the Cabinet which in recent days has tried to call out the corrupt while endeavoring to promote transparency.

On Monday, the Industries Ministry released the names of the recipients of subsidized currency to the Central Bank of Iran to be broadcast to the public later by the bank.

 nationalist tone

The minister took a stridently nationalist tone as he discussed the complete ban on car imports. 

“The car imports ban will save the country 2.2 billion dollars in spending.”

Pointing to the recent move by the belligerent US president to pull the country out of the historic nuclear deal, Shariatmadari said, “This is an outright economic war.” Indicating that Iran no longer can spend hard-earned foreign exchange on the import of cars deemed as an “unnecessary luxury” by officials.

Shariatmadari denied the speculations that the ban was put in place to support domestic carmakers enabling them to further increase their ironclad grip on the market. Imported cars merely have a 5% share of the market.

He says the customers for imported vehicles are a totally different social group from those who buy locally made cars; therefore, it is not sensible to relate the ban to an irrational support of domestic products.

 Illicit Import Permits

Another topic addressed by Shariatmadari was the controversy around the local import order registration website known as Sabtaresh. After getting auto import permits from the Industries Ministry, local firms must also register online with the Trade Promotion Organization separately for every single unit.

The government shut down the website in the summer of 2017 to reconsider car import tariffs. A lingering debate has been going on for months, indicating that while the website was closed to most firms, import permits for thousands of vehicles were registered on it.

The minister confirmed the unauthorized registrations and stressed, “We have identified the culprit and supplied the law enforcement with the IPs used to hack the website.”

Head of General Inspectorate Organization of Iran, Naser Seraj, says the hacker has been arrested. The person has confessed and provided the organization with the code used to breach the website.

On Monday, President Rouhani issued an order calling on the industries minister to conduct an investigation into the matter and report the results to the public.

 Profiteering Accusations

Recently with auto prices skyrocketing in Iran’s market, accusations of profiteering have been leveled at the local automakers. When asked about the rumors that the two major local carmakers Iran Khodro and SAIPA have hoarded vehicles to later sell them at higher prices, Shariatmadari dismissed the allegations altogether and called them unviable.

According to him, it takes ten industrial sheds with an area of 5,000 square meters to hold one day worth of car production output. 

He then posed a rhetorical question, “How is it then remotely possible to hoard 90,000 vehicles [as claimed by some news website]?”

The minister maintained that if there have been any violations, the Consumers and Producers Protection Organization would be instructed to firmly deal with the guilty parties.

The president has also demanded a probe to be launched into the matter and that the results to be published in two weeks time.


Donald Trump nuclear deal Auto Industry Iran Industry Ministry dollar exchange rate Transparency Campaign