and exact means by which corrupt and competing government ofļ¬cials
are participating and encouraging large-scale illicit commercial activ-
ities, but considering the scope of the problem it is highly probable that
state agents knowingly ignore, if not support, the evasion of the trade
Hambastegi, 24 Bahman 1379 (February 12, 2001).
Bonyan, 25 Bahman 1380 (February 13, 2001).
172 Bazaar and State in Iran
The least systematized forms of smuggling are generally small scale,
are organized for local-level consumption (i.e. the networks do not
directly extend beyond the border region), and are not necessarily
predicated on long-term commercial partnerships and dealings. These
activities, which existed prior to the Revolution, received a boost during
the revolutionary upheaval when industrial and commercial units were
paralyzed by strikes, ļ¬nancial disruptions, and political uncertainty.135
During the initial revolutionary era, lucrative cross-border operations
that reaped short-term shortfalls were operated by various ethnic groups
living in the border region and sometimes enjoying kinship relations
across Iranā™s borders with Iraq, Turkey, Pakistan, Afghanistan, and the
UAE. Thus, these cross-border operations were based on localized,
ā˜ā˜organic,ā™ā™ and ethnic ties that substituted ascribed identities and
loyalties for formal institutions and the Bazaarā™s reputation system.
Between these two extremes of petty smugglers and large-scale state
importing lie the regularized and highly developed smuggling networks
that were more closely connected to the Tehran Bazaarā™s value chain.
These more regularized and national networks grew out of the localized
smuggling networks that accounted for prerevolutionary activities. At
ļ¬rst, many of these smugglers operated on their own account. However,
over time, as volumes of goods increased and the risk associated with
capture increased, many bazaaris realized they had no option but to use
these networks. Thus these smugglers began acting as agents for either
Iranian businessmen who had moved to the Arab shores of the Gulf or
importers and wholesalers in the Tehran Bazaar. A bazaari described the
initial rise of smuggling as follows: ā˜ā˜At the beginning, we did not know
what was going to happen [in terms of economic policy]; the future was
uncertain. We were forced to work with the locals who knew how to
bring goods from Dubai, Kuwait, and Turkey. Then we realized that the
war was not going to end and the government was not going to let go of
these good proļ¬ts [from monopolized commerce]. So we slowly began
to work with a more stable system and with merchants in Dubai and
These operations constitute ā˜ā˜legal smugglingā™ā™ (qachaq-e qanuni) in
that they operate in the shadow, and as a byproduct, of ofļ¬cial legal
structures and take advantage of legal loopholes to maneuver around
and transcend trade restrictions.136 Even if the result of these activities
Journal de Teheran, October 29, 1978.
Manuel Castells and Alejandro Portes, ā˜ā˜World Underneath: The Origins, Dynamics,
and Effects of the Informal Economy,ā™ā™ in The Informal Economy: Studies in Advanced
and Less Developed Countries, ed. Alejandro Portes, Manuel Castells, and Lauren
A. Benton (Baltimore: Johns Hopkins University Press, 1989).
Networks in the context of transformative agendas 173
violates the intent of policies and circumvents customs, the process is
ā˜ā˜formalā™ā™ in that at various key stages it functions with legal immunity,
and even support. The majority of this trade is based on the emerging
trade nexus in the southern Persian Gulf, with socioeconomic and legal
pillars in Dubai, Iranā™s free trade zones (Kish, Qeshm, and Charbahar),
and major transportation systems extending from the south through Iran
and to Central Asia, Pakistan, and Afghanistan.137 As Saskia Sassan has
argued on the global level, advances in transportation and tele-
communication have facilitated territorial dispersion, and concurrent
agglomeration of activities in global cities and locales.138 But the cen-
tralization within the Persian Gulf region does not seem to be occurring in
Tehran, let alone the Tehran Bazaar; rather it has its epicenter in the
Straits of Hormuz, where a legal, ļ¬nancial, transportation infrastructure
for commerce has been created by Iran and the Gulf states.
Let me describe the process in greater detail. First, importers or
representatives of foreign ļ¬rms arrange for goods to be shipped to Dubai
(100 miles from Iran), which is one of the largest and busiest air and sea
ports in the world. Since the revolution and the creation of new markets
in post-Soviet Central Asian republics, roughly a quarter of re-exports
from Dubai are earmarked for Iran.139 Iran has consistently ranked as
the UAEā™s number one re-export destination, far outpacing Saudi
Arabia and India (the next two re-export destinations in the past two
decades). Annual re-exports from Dubai, which were in the order of
$200ā“500 million in the mid-1970s, more than doubled by the 1980s
and were roughly $3 billion in the 1990s. (Iranā™s exports to Dubai are
roughly $1 billion.) It is no wonder that a prescient trader in Dubai
commented, ā˜ā˜Whenever there is chaos or political upheaval across the
water, we see a proļ¬t.ā™ā™140
Most of the trade is conducted by the large Iranian community that
lives in the UAE. Out of the 605,000 inhabitants of Dubai, 70,000 have
an Iranian passport and another 70,000 are of Iranian ancestry.141 The
One report suggested that the Persian Gulf is the source for 80 percent of smuggled
goods. ā˜ā˜Cheh Kalahaii va Az Cheh Mabadyii be Tawr-e Qachaq vared Mishavad?ā™ā™
Barresiha-ye Bazargani 135 (Aban 1377 [Octoberā“November 1998]), 16.
Saskia Sassan, The Global City (Princeton: Princeton University Press, 2001).
Trade statistics for Dubai are available from the Dubai Chamber of Commerce and
Industry, Industries and Studies Department.
Associated Press, April 6, 1980.
Eqtesad-e Iran 360 (Bahman 1380 [February 2002]), 25. Parsa and Keivani estimate
that 100,000 Iranian workers are in Dubai. Ali Parsa and Ramin Keivani, ā˜ā˜The
Hormuz Corridor: Building a Cross-Border Region between Iran and the UAE,ā™ā™ in
Global Networks, Linked Cities, ed. Saskia Sassen (London, Routledge, 2002), p. 190.
Another source states that 300,000 Iranians live in the UAE. Hamshahri, 27 Khordad
1382 ( June 17, 2003).
174 Bazaar and State in Iran
Iranians have moved to Dubai at various times over the past century and
for diverse reasons. Today, this diverse Dubai-based Iranian commu-
nity, as well as Iranian entrepreneurs, has established 3,000 ļ¬rms in the
UAE, 132 of which are in the Jebal Ali free port in Dubai.142 Thus, a
new mercantile class has emerged in Dubai that has led some observers
to comment that Iranā™s private sector is now situated in Dubai.143 Most
of these actors do not have direct ties to the Tehran Bazaar, but are
connected to international capital and the governments in the UAE and
Iran. Even those few who were wholesalers and traders in the Tehran
Bazaar prior to the Revolution rely on relations with Iranā™s postrevolu-
tionary commercial regime. Dubai, therefore, functions as the initial,
legal, and infrastructurally developed conduit for many of the transna-
tional smuggling operations that channel goods to Iran, and through it to
Afghanistan, Pakistan, and the new Central Asian republics.
From Dubai, commodities are sent to one of Iranā™s free trade zones in
the Persian Gulf, border markets, and border cooperatives.144 In the
past decade, the Islamic Republic has established numerous commercial
zones in the border region in order to attract local and foreign invest-
ment, promote exports, gain access to new technologies, create jobs and
income opportunities for skilled labor, act as a re-export zone for the
landlocked countries in Central Asia, and also to be a venue to gradually
liberalize trade.145 These zones range from forty-three isolated border
markets to special trade zones (e.g. Sarakhs, Khorramshahr, Bushehr,
and Astara) to free trade zones in the Persian Gulf (Kish, Qeshm, and
Chabahar). The primary commercial venues are the free trade zones.
Established by the Free Trade Zone Act of September 1993, they are
ļ¬nancially independent of the central government. Thus, they are not
accountable, and the Ministry of Economic Affairs and Finance and the
Organization of Management and Planning (previously named the
Organization of Planning and Budget) do not supervise them.146
Therefore, commercial activities in these zones are not integrated into the
broader commercial regime, and instead stand as an articulation between
the formal and informal economies. The multiple special commercial
Seda-ye ā˜Edalat, 30 Khordad 1380 ( June 20, 2001). An article in Hamshahri estimates
the total number of private and public ļ¬rms owned by Iranians in the UAE at 4,000.
Hamshahri, 27 Khordad 1382 ( June 17, 2003).
Hayat-e Naw, 6 Day 1379 (December 26, 2000).
I would like to thank Siamak Namazi and Atieh Bahar Consulting Firm for giving me
access to their reports and analyses of the free trade zones.
Parsa and Kaivani argue that Iranā™s free trade zones in conjunction with the free trade
zones in the UAE can develop into a ā˜ā˜Hormuz growth corridor.ā™ā™ Parsa and Keivani,
ā˜ā˜The Hormuz Corridor.ā™ā™
Dawran-e Emruz, 6 Bahman 1379 ( January 25, 2001).
Networks in the context of transformative agendas 175
zones have also acted as a shelter for extra-legal practices of state
Next, traders arrange for the piecemeal transfer of goods from the free
trade zone to Iran via individual ā˜ā˜travelersā™ā™ from the local region who
have a tax-free allowance for personal use (the speciļ¬cs of free trade
zone laws have varied since their establishment). Notably, in a recent
poll 90 percent of importers and exporters surveyed believed that free
trade zones and border markets were the main source of smuggling.147
One important component laying the groundwork for this smuggling
process is the improved transportation in the southern area of Iranā™s
Persian Gulf coast.148 Because of the Iranā“Iraq war, which raged in the
northern part of the Persian Gulf, the Islamic Republic relocated its port
facilities from Khorramshahr and Bandar Emam (Bandar Shah) to
Bushher and, more importantly, to Bandar ā˜Abbas. Built in 1984,
Bandar ā˜Abbasā™ Shahid Rajaii Port is located across from the free trade
zone islands of Kish and Qeshm and across from the UAE.149 More-
over, since 1996 a rail link has connected Bandar ā˜Abbas to Central Asia
(via Sarakhs) and the twenty-ļ¬rst-century Silk Road.
Once imports make their way to the mainland, they are shipped north
to wholesalers and middlemen in major Iranian cities. Armed with
weapons and a bundle of cash to bribe customs ofļ¬cials, under cover of
the night, the smugglers transport the goods to assigned locations fur-
ther inland where their illicit imports are less traceable. In the words of
one of the many Toyota pick-up drivers, ā˜ā˜When we reach Fars
[Province] we know we are home.ā™ā™ Much of this trade is described as
quasi-legal because the process cobbles together legally sanctioned
methods and instruments (e.g. imports to the free trade zones and
border markets, licensed boats and carriers, and legal import allowan-
ces) and informal relations with the intent to evade the trade regime. In
short, formal and informal economies have a symbiotic relationship, and
the government is one in the key actors in cross-national exchange.
Even though the stateā™s initial and stated impetus in establishing these
exceptional economic zones was to encourage the growth of the man-
ufacturing industry and to create jobs and attract investment to deprived
regions, the state was no doubt equally compelled by a motivation to
control its citizens and extract revenue from the already ļ¬‚ourishing
smuggling trade. The regime stepped in to regulate the informal
Eqtesad-e Iran, 360 (Bahman 1380 [ Januaryā“February 2002]).
Fariba Adelkhah, ā˜ā˜Who Is Afraid of Smuggling? We All Are Smugglers, Unless . . . ā™ā™
(paper presented at the annual meeting of the Middle East Studies Association,
Washington DC, November 2002).
Parsa and Keivani, ā˜ā˜The Hormuz Corridor,ā™ā™ 195ā“6.
176 Bazaar and State in Iran
activities through these border markets, cooperatives, and free trade
zones, only to shift the borders between the formal and informal
economy, modifying, but not ending, its practice. To borrow the words
of Asef Bayat, Third World stateā“society relations are ā˜ā˜characterized by
a combined and continuous process of informalization, integration, and
Through the creation of a new institutional setting the state has
encouraged new activities and roles for individual bazaaris by fashioning
a new set of networks to allocate resources critical for their material and
social reproduction. Commercial networks are restructured since they
are embedded in a radically different political economy. Whereas during
the Pahlavi era bazaaris expended energies within the Bazaar to ļ¬nd
customers, trustworthy partners, and sources of credit and market
information, now most energies go to establishing and cultivating con-
tacts outside the Bazaar, whether with state agents in ministries, cus-
toms houses, boarder cooperatives, and state-owned banks or with new
commercial actors in Dubai, the free trade zones, or on the smuggling
route. The bazaarisā™ new value chains compete with government-
protected economic organizations that operate within a privileged
institutional setting. What bazaaris term the ā˜ā˜statiļ¬cationā™ā™ (dawlati-
shodan) of the Bazaar, whilst no always hurting the merchants ļ¬nan-
cially, weakened their ability to maintain the horizontal and multifaceted
ties that were critical for the cooperative hierarchy. Exclusionary vertical
ties between the bazaaris and state agents, smugglers, or traders in the
Gulf region have replaced the crosscutting credit and social relations
that prevailed in earlier decades. These new networks are based on
information that is exclusive, opaque, and asymmetric and revolve
around monopolistic access to resources. The channels of patronage
that emanate from the state have transformed stateā“bazaar relations into
patronā“client ties that are inscribed by major power differentials that
generate disunity. Thus, the degree of embeddedness seems to be less
critical than the political economic structure of these embedded networks.
Delocalizing the Bazaar
As the dissection of the free trade zones, border markets, and trade units
in ministries suggests, commercial activity is no longer concentrated in the
Tehran Bazaar. As we saw, the maintenance of cooperative hierarchies in
the prerevolutionary era occurred in the covered marketplace. The pre-
sent situation is radically different; commercial relations transcend the
Bayat, Street Politics, p. 12.
Networks in the context of transformative agendas 177
stateā“society divide and national borders, and accordingly the conļ¬nes of
the Bazaarā™s alleys. Over time the heterogeneity in commercial channels
created by the Islamic Republic and by merchantsā™ evasions generated
multiple and disparate loci. The commercial has been re-territorialized151
and the Bazaar has become de-localized.
This is captured well by my ļ¬eld research experience. When I sought to
collect information about commerce prior to the Revolution, I conducted
interviews with older bazaaris still working in the Bazaar, or visited
retired merchants and wholesalers at their homes. In addition,
I reviewed prerevolutionary newspapers, journals, and dissertations that
described the physical space of the Bazaar and economic practices
within it as a distinct and self-contained world. The Bazaarā™s commer-
cial networks were mapped onto the physical setting of the marketplace.
Thus was the logic underlying one older bazaariā™s poetic deļ¬nition