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short-term assets. Political turmoil, factionalism, and personalism at the
level of the bureaucracy all work to make even contacts and informal
relationships between bazaaris and government of¬cials ephemeral.
Cabinet reshuf¬‚es and parliamentary turnovers can easily make contacts

Seyed Morteza Afghah, ˜˜The Effect of Non-economic Factors in the Process of
Production in Iran,™™ in The Economy of Iran: The Dilemmas of an Islamic State, ed. Parvin
Alizadeh (London: I. B. Tauris, 2000).
Iran Daily, December 7, 2000.
Iran Daily, February 27, 2001.
Networks in the context of transformative agendas 161

From the perspective of the state, moreover, trade rules must remain
indeterminate, variable, and even arbitrary in order to maintain
patronage and clientelism as a viable political tool of social control.
Uniform and consistent laws based on fair access and equal application
of laws ˜˜preclude the striking of particularistic deals.™™98 Instead, policy
indeterminacy allows ministers, tax collectors, and bureaucrats to act as
bene¬cent patrons who cultivate dependency relations with clients with
pecuniary bene¬ts. Thus, under the Islamic Republic the state was the
patron to a newly emerging ˜˜private™™ commercial elite, based on per-
sonalism rather than group af¬liation. 99

Methods of incorporation
The incorporation of commerce operated at three interrelated levels.
First, there was the politically motivated incorporation of speci¬c
associations in order to reward some and utilize them as means to
monitor the Bazaar. Second, the state passed a series of general eco-
nomic laws that regulated all commercial activities, including the
Bazaar™s. Finally, the state created a series of organizations that devel-
oped value chains that competed with the Tehran Bazaar™s networks.

Political incorporation Beyond the state™s accommodation of
Islamist elements from the Bazaar, the Islamic Republic also transformed
the voluntary organizations within the Bazaar into ideological censors.
The main vehicle for monitoring and mobilizing the Bazaar was the
Society of the Islamic Associations of Tehran™s Guilds and Bazaar
(Jame˜eh-ye Anjomanha-ye Eslami-ye Asnaf va Bazar-e Tehran). It was
established in the fall of 1980 by Beheshti as an umbrella organization
bringing together the many Islamic Associations that during the revo-
lutionary turmoil helped distribute goods and services and coordinate
demonstrations. The society had the explicit mandate to ˜˜destroy the
idol worshippers in the Muslim Bazaar™™ and to prevent ˜˜intellectual
deviation.™™100 State of¬cials have made periodic announcements calling
on these associations to maintain the Islamic character of the Bazaar by
limiting hoarding and pro¬teering. In 1983, Speaker of the Parliament

Cag lar Keyder, ˜˜The Housing Market from Informal to Global,™™ in Istanbul: Between
the Global and the Local, ed. Cag lar Keyder (Lanham: Powman and Little¬eld
Publishers, 1999), p. 147.
There are parallels here with Perthes™ analysis of Syrian economic policy in the 1970s
and 1980s. Volker Perthes, ˜˜The Syrian Private Industrial and Commercial Sectors
and the State,™™ International Journal of Middle East Studies 24 (May 1992), 207“30.
Hamshahri, 22 Mehr 1381 (October 14, 2002).
162 Bazaar and State in Iran

Hashemi-Rafsanjani (and subsequent president, 1989“1997) called on
the Islamic associations to keep a close eye on guild members to ensure
that they followed government regulations and pricing.101 In addition,
the Islamic associations were important in mobilizing ˜˜behind the war
front™™ by collecting and coordinating donations for military and civilian
victims.102 For instance, in the early stages of the war, the fabric sellers
in the Tehran Bazaar promised to donate 1,000 million rial for the war
wounded.103 In general, to ensure that goods would go to the needy,
bazaaris preferred to give support in kind, rather than in money.104
From the beginning of the Revolution the voluntary associations were
under the exclusive control of the staunchly conservative Islamic Coa-
lition Association and were highly partisan and exclusionary. Since its
establishment the general secretary of the Society of Islamic Associa-
tions has been Sa˜id Amani, a leading ¬gure in the ICA and the uncle of
one of the ICA™s principal spokesmen, Asadollah Badamchian.105 The
society™s ruling councils have comprised clerics handpicked by Kho-
meini and allied with the conservative faction in the regime. On the
sixteenth anniversary of the Islamic Revolution, Amani claimed that in
all aspects the situation of the commercial sector was better than during
the prerevolutionary era.106 This statement, which was published in
Asnaf, rings hollow given that this periodical, along with most other
news sources, regularly quotes members of the commercial sector
recounting dif¬culties facing the guilds, and attributing them to govern-
ment policies since the Revolution.
As mentioned in Chapter 3, during our discussions leaders of the
Islamic associations freely admitted that they had lost touch with the
members of the bazaars, while the bazaaris claimed that the associations
represented the interests of the regime instead of the Bazaar. When I
asked a contact in the Bazaar to refer me to the head of his guild™s
Islamic association he responded, ˜˜Why do you want to interview these
people? Nobody takes them seriously anymore. They just parrot what
the government says and never do anything for us.™™ Another bazaari
focused on the unresponsive nature of these organizations when he told

Jomhuri-ye Eslami, 9 Esfand 1361 (February 28, 1963).
Personal interviews. During the war, the general secretary of the society argued that
these ˜˜popular efforts™™ should be seen as an indication of the potential bene¬ts of
allowing the private sector to be more active in the economy. Resalat, 13 Esfand 1365
(March 4, 1987).
Abol Ghassem Lebaschi, interview by Habib Ladjevardi, tape recording no. 3, Paris,
France, February 28, 1983, Iranian Oral History Collection, Harvard University, p. 2.
Ibid. Personal interviews.
Badamchian and Banaii, Hayatha-ye Motalefeh-ye Eslami, p. 133. Amani died in 2002.
Asnaf no. 35 (Farvardin 1375 (March“April 1996)), 10.
Networks in the context of transformative agendas 163

me, ˜˜They do their own thing. They don™t want to hear from the
reputable merchants. They don™t care what problems we face or what
needs to be done. They speak in the name of the guilds and the Bazaar,
but treat us as a tool [for their own ends].™™
Finally, when internal monitoring and persuasion did not work, the
state turned to coercive means. On a number of occasions the leaders of
the Islamic Republic have warned bazaaris that some members have
sullied the good Islamic ˜˜reputation™™ of the entire Bazaar and that the
government would ˜˜identify those who in the days of war and revolution
have pursued their own interests™™ rather than those of the Republic.107
As part of this initiative, economic offences have been placed in the
hands of the Islamic Revolutionary Courts and Prosecutor™s Of¬ce.
Thus, economic offences such as ˜˜overpricing™™ and ˜˜hoarding™™ are
dealt with by the same judicial body established to punish assassination
attempts, crimes of the Pahlavi regime, and drug smuggling. In 1987
Khomeini allowed the Council of Ministers to impose discretionary
punishments (ta˜zirat) against people convicted of hoarding and con-
spiring to drive up prices. Throughout the postrevolutionary era, the
state has used periodic antipro¬teering and hoarding campaigns and
threats to keep the Bazaar in check.108

Incorporation via regulation Incorporation occurs through laws
and policies that regulate activities, create state agencies, and pattern
social relations by distributing power. Under the Islamic Republic, the
state™s foray into incorporating the Bazaar consisted of a series of legal
measures that limited private commercial activities and subordinated
them to state and quasi-state authorities with monopolistic powers. As
two economic experts have pointed out, ˜˜The expanded government role
in the postrevolutionary period was . . . not solely or even primarily
through a shift of balance from private to public ownership. It was
manifested in direct interventions in the operation of markets “ foreign
exchange controls, maintenance of a system of multiple exchange rates,
control on interest rates and bank credits “ as well as direct price controls
in a large number of product markets.™™109 The upshot has been sustained
state involvement in the economy during the past two decades. Even after
some economic liberalization in the 1990s, Iran™s international trade

Quoted in Nazemi, ˜˜War and State Making in Revolutionary Iran,™™ p. 245.
Ettela˜at, 13 Aban 1361 (November 4, 1982), 9 Day 1361 (December 30, 1982), 14
Ordibehesht 1367 (May 4, 1988) and 11 Farvardin 1367 (March 31, 1988).
Hassan Hakimian and Massoud Karshenas, ˜˜Dilemmas and Prospects for Economic
Reform and Reconstruction in Iran,™™ in The Economy of Iran: The Dilemmas of an
Islamic State, ed. Parvin Alizadeh (London: I. B. Tauris, 2000), pp. 34“5.
164 Bazaar and State in Iran

regime was ranked 132 out of 155 in the World Bank™s Doing Business
survey of economies,110 comparable with economic regimes such as
Cuba, Libya, and North Korea.111 By another measure of ˜˜market
openness™™ (with 1 equaling complete market freedom and 0 representing
complete lack of market freedom) Iran™s economy went from 0.628
during the mid-1970s to 0.304 in the transition period (1979“81), to the
nadir of 0.150 in the 1981“8 period, only slightly inching its way to
greater market deregulation during the 1990s “ 0.367 (1988“92), 0.317
(1993“6), and 0.45 (1997“2000).112 These comparative and aggregate
numbers re¬‚ect the series of policies under the Islamic Republic that
resulted in some 300 goods being under government price and quantity
controls113 and as much as 90 percent of civilian imports being in the
hands of the government by the late 1980s.114
Far-reaching state intervention into the economy, however, did not
manufacture a centralized and comprehensive planned economy. Even
during the war, the Islamic Republic did not replace markets with a
command economy. Government intercession during the past two dec-
ades was a series of isolated and largely myopic schemes that were dictated
by immediate circumstances. In 1994 Kamal Athari, a leading economist,
commented, ˜˜The government has rejected the free-market logic and
principles of command economy without offering a third way.™™115
Government of¬cials and bazaaris concurred that the primary method
of reducing imports and protecting local manufacturers has been the use of
nontariff barriers such as the outright banning of imports or licensing
requirements.116 A whole series of procurement and distribution centers
were established during the 1980s, giving the state outright monopolies
over selected groups of imports (generally raw materials, heavy machinery,
and staple goods).117 The National Iranian Industrial Organization along
with trade units within the ministries has managed all imports of raw

World Bank, ˜˜Doing Business in Iran™™; http://www.doingbusiness.org/Explore
Economies/Default.aspx?economyid=91 (accessed June 2006).
Iran is 151st out of 155 on the Heritage Foundation and The Wall Street Journal™s 2002
Index of Economic Freedom. In terms of freedom ranking, its trade policy is ranked as
˜˜very high levels of protection.™™
˜Ali Farahbakhsh, ˜˜Eqtesad-e Iran dar Shesh Tablo,™™ Payam-e Emruz 43 (Bahman
1379 (February 2001)), 42.
Hakimian and Karshenas, ˜˜Dilemmas and Prospects for Economic Reform,™™ p. 35.
Vahid Nowshirvani, Encyclopaedia Iranica, s.v. ˜˜Commerce in the Pahlavi and Post-
Pahlavi Periods,™™ p. 87.
New York Times, November 20, 1994.
Duties and commercial taxes in Iran have historically been relatively low. See
Nowshirvani, Encyclopaedia Iranica, s.v. ˜˜Commerce in the Pahlavi and Post-Pahlavi
Periods,™™ pp. 75“89.
Ahmadi-Amuii, Eqtesad-e Siyasi-e Jomhuri-e Islami, pp. 22“3.
Networks in the context of transformative agendas 165

materials and capital goods for public industries, and has sold excess
quantities to the private sector. During most of this time, ministries have
imported goods using highly subsidized foreign currency, enabling them
to price out private sector competitors and enjoy major windfalls.
The state also structures international trade through licensing
requirements. The Ministry of Commerce lists the goods that can be
legally imported and only then are importers allowed to apply for a
license from the ministry responsible. The licensing system both curtails
the quantity of imports in the hands of the private sector and reduces the
number of legal importers.118 Iran™s nontariff barriers are much higher
and more pervasive than those of most other developing countries.
A World Bank study of forty-three developing countries for the period
1995“8 found that restrictive licensing conditions applied to just 10
percent of imports and prohibitions applied to another 2 percent. In
contrast, even after the replacement of many nontariff barriers by their
tariff equivalents in October 2000, Iran™s trade regime placed licensing
conditions on 45 percent of goods. Of the forty-three countries in the
study, only India made greater use of licensing restrictions.119 Another
mechanism to dampen and control imports was foreign currency con-
trols. Owing to political instability, demand for foreign currency
increased and led to shortages. The state™s response was to monopolize
the exchange of foreign currency and to establish the Exchange Allo-
cation Commission to distribute hard currency at ¬xed rates.
Exports of non-oil goods (especially hand-woven rugs, antiques, pre-
cious metals, and jewelry) were also restricted to temper capital ¬‚ight and
preserve the value of the rial. The outbreak of war and Iran™s need to
purchase arms on the world market exacerbated the hard currency
shortage. Thus, the state imposed foreign exchange repatriation contracts
(payman-e arzi) that required exporters to deposit collateral with the
Central Bank, the sum being based on the value of exports and appre-
ciated ¬xed exchange rates as collateral with the Central Bank. (Since the
1990s the Tehran stock exchange has been a legal mechanism for
exporters to sell foreign earnings at the market rate.) In the 1960s and
1970s, the Tehran Bazaar had access to a steady stream of hard currency
via non-oil exports (primarily hand-woven rugs) that was largely inde-
pendent of the state-run ¬nancial institutions. Foreign currency markets
now either are heavily regulated by the Central Bank or have been based in
highly speculative black markets that the government never sought to
Hakimian and Karshenas, ˜˜Dilemmas and Prospects for Economic Reform,™™ p. 35.
World Bank, ˜˜Trade and Foreign Exchange Policies in Iran: Reform Agenda,
Economic Implications and Impact on the Poor,™™ Report no. 22953-IRN, November
1, 2001.
166 Bazaar and State in Iran

control fully. These regulations have encouraged exporters to resort to
unof¬cial channels to export their goods and have also reduced the credit
relations that used to exist between the Bazaar and manufactures.


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