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ners and shying away from unfamiliar actors, clientelistic and vertical
ties are strengthened, but the growth of diffuse relations revolving
around polycentric webs is deterred. In short, relations in the carpet
bazaar do contain cooperative hierarchies, but since these networks of
relations are kept distinct and are not integrated into an overall system
through crosscutting relations and multifaceted relations that bring
broader members of the carpet bazaar together, the overall form of
governance is one closer to a coercive hierarchy.

The tea bazaar
Today, our main problem is not tea; it is the management of tea.
Tea broker, April 2001

Iranians consume four times the world average of tea.38 Whether it is a
brief meeting between colleagues or a large gathering of relatives and

Indicative of this was that my most fruitful interviews with carpet exporters were
conducted in their homes or in Hamburg. Interviews in the Bazaar were rushed and
often cursory.
Neil Fligstein, ˜˜Markets as Politics: A Political-Cultural Approach to Market
Institutions,™™ American Sociological Review 61 (August 1996), 656“73.
Islamic Republic of Iran, Ministry of Commerce, Institute for Commercial Study and
Research, ˜˜Bazar-e Jahani-ye Chay,™™ 1370 (1991), p. 122.
Carpets, tea, and teacups 207

friends, all social events include the immediate and continual serving
and sipping of strong black tea. Although tea consumption became
wide-spread among Iranians only in the twentieth century, tea has
acquired the reputation of being Iran™s national drink. With some
85,000 tons of processed black tea consumed annually at a value of $25
million, its trade is a pro¬table business.39 It is also a commodity that
has acquired political importance. Since the early decades of the last
century, the state has taken a special interest in its cultivation, pro-
duction, and import. Reza Shah identi¬ed tea, along with sugar and
tobacco, as one of the main agricultural sectors in Iran™s development
drive, and accordingly invested in its cultivation. The ¬rst tea-processing
factory and silo were established by the government, and Reza Shah
hired Chinese experts as consultants for the cultivation and processing
of tea and sent Iranian students to study the tea industries in India, Sri
Lanka, and Indonesia.40 More recently, the tea sector has been one of
the more contentious ¬elds in the state™s attempts to privatize the
economy and liberalize commerce. Hence, management, speci¬cally
state management, is the main character in the story of tea.
Tea cultivation in Iran takes place along the Caspian coast in Gilan and
Mazandaran, and its processing, storing, and much of its packaging have
been centered in this region. The Tehran Bazaar, however, has acted as a
second home to the tea trade since it has been the hub through which tea
from Sri Lanka and India (especially varieties from Assam) has been
imported and distributed for consumption, and more often for mixing
with Iranian varieties. For decades now, tea merchants, wholesalers, and
brokers have been clustered in a few caravanserais in the Tehran Bazaar,
with Hajj Zaman Sara, Sina Sara, and Naseri Sara being the principal
marketplaces.41 These small saras are deep in the heart of the Bazaar, in
areas that the casual passer-by would not notice, but well known to all
those in the tea business. Moreover, the main tea companies that package
and sell tea (e.g. Shahrzad, Golestan, and Jahan tea) also have their main

Dawran-e Emruz, 25 Aban 1379 (November 15, 2000).
It should be noted that the state invested in the processing of tea and established
factories that were independent of tea plantations. The lack of a uni¬ed management
that integrated the cultivation and processing of tea differs from India and Sri Lanka,
where historically tea plantations and factories were under single ownership or
integrated via collectivization. Integrating cultivation and processing has a number of
bene¬ts such as ef¬ciencies in scale, improved quality control and investments in
quality by processors, lower transaction costs, and greater worker and farmer control.
This issue was brought to my attention by an Indian and an Iranian tea broker who were
meeting in Tehran.
Note that retailers selling tea are scattered throughout the Bazaar, their location being
dictated by consumer demand, rather than suppliers.
208 Bazaar and State in Iran

sales of¬ces in the Bazaar or in the immediate area surrounding the
Bazaar, such as the Galobandak Crossroads (Map 2.1).
Despite 85 percent of tea production taking place in Gilan, the tea
merchants in the 1960s and 1970s were of Azeri origin or from the city
of Yazd. One old-timer explained, ˜˜You don™t have to be a tea picker to
be an expert, but it does help to have relatives and acquaintances if you
want to enter this line of work.™™ Thus, as Azeris and Yazdis migrated to
Tehran in the post-World War II era, many joined families and
acquaintances who were some of the ¬rst entrepreneurs involved in the
tea industry.
One of the key actors in the tea bazaar was, and to a lesser extent
continues to be, the broker. When it came to the issue of brokers,
interviewees who were members of the tea bazaar were among the more
adamant proponents of the idea that they were necessary for the
operation of the market. Brokers not only are responsible for identifying
buyers and sellers and evaluating their reputations, but are critical in
appraising the quality of loose tea and suggesting appropriate blends.
The most renowned brokers are said to be able to ˜˜just look at the dried
tea leaves, and tell you from which Indian tea plantation they origi-
nated.™™ Thus, brokers play the role of experts in appraising and certi-
fying tea imports, a nonstandard good. Despite Iran following the
classi¬cation system of the International Organization for Standardiza-
tion and foreign tea being evaluated through major auction houses in
England (and increasingly in producer countries), evaluating the
strength, fragrance, color, consistency, and value of each individual
batch of tea requires expert knowledge. Thus, like carpets, but to a lesser
extent, tea is a nonstandard good that encourages clientelism, as well as
localization. However, if we do not include retailers, there are far fewer
actors involved in the tea trade than the carpet bazaar, with the number
of importers being less than a few dozen importers and wholesalers of
various levels and brokers numbering roughly 500 in all of Iran.42

Tea and the state
For over four decades the state has been an essential actor in the mar-
keting of tea. In 1958, the National Tea Organization (NTO, Sazman-e
Chay-e Keshvar) was established under the Ministry of Customs and
Monopolies (it was initially established as a publicly owned company
named the Tea Company). Re¬‚ecting the decline in state regulation of
pricing, in subsequent years supervision of the NTO was transferred to

Asnaf, 91 (Azar and Day 1379 [December 2000“January 2001]), 40“2.
Carpets, tea, and teacups 209

several other ministries, including the Commerce and Finance minis-
tries.43 In order to protect Iran™s tea growers, during the 1960s and
1970s the tea trade was regulated by the state using conditional import
restrictions. That is, importers were required to purchase a set quantity
of domestic tea from the NTO for every unit of imported tea. The ratio
of domestic to imported tea ¬‚uctuated, but was set at roughly two units
of domestic for every one unit of imported tea. Nearly all of Iran™s tea
imports came from Sri Lanka and India, and once shipments arrived in
Iran, tea packagers blended these teas with the homegrown varieties.
Thus, the vast majority of tea consumed in Iran prior to the Revolution
was typically a blend of local and foreign teas (dealers estimated that
probably 80 percent of tea consumed prior to the Revolution was some
type of blend).44 Domestic producers enjoyed earnings that allowed
them to maintain quality and make modest investments in the areas of
cultivation and processing. With importers dealing directly with factory
owners, a degree of cooperation existed between the Bazaar and the
industry. Finally, during this period, small amounts of Iranian tea were
also exported, often as a result of conditional requirements for exporters.
What is signi¬cant about the organization of the tea trade in the
Bazaar is that this state regulation ensured domestic production, but
also provided the conditions for the persistence of a self-regulating tea
bazaar. The value chain linking importers, wholesalers of various levels,
and brokers was based on regularized exchanges among actors localized
in the Tehran Bazaar. Wholesalers specialized in particular types of tea
and regions of the country, distributing the blends that were most sui-
table to the tea-drinking tastes and brewing methods of each region.
Widespread use of credit within the commercial sector also tied mem-
bers of the Bazaar to each other, and then to domestic factories involved
in tea processing and packaging. Interpersonal relations based on family
ties and ethnic allegiances, along with daily exchanges among the small
and localized traders, all helped to embed economic relations in multiple
and reinforcing social spheres. Cooperative hierarchies thus persisted
under prevailing state regulations.
After the Revolution state involvement continued, but owing to the
nationalist agenda stressing self-suf¬ciency and populist means of rule,
the state altered the speci¬c policies structuring the tea sector and

Islamic Republic of Iran, Chamber of Commerce, Industry, and Mines, Center for
Research and Analysis of the Chamber of Commerce, Industry, and Mines, Reza
Azimi-Hosayni, ˜˜Barresi-ye Tawlid va Masraf-e Chay dar Iran va Jahan,™™ Mordad
1372 ( July“August 1993).
Interviews with tea sellers in Tehran; and Daniel Balland and Marcel Bazin,
Encyclopedia Iranica, s.v. ˜˜Cay,™™ p. 105.
210 Bazaar and State in Iran

commerce. During the Iran“Iraq war, tea was identi¬ed as an essential
commodity and emphasis was placed on producing large quantities at
subsidized prices.45 Imports were strictly controlled by the Ministry of
Commerce and were rationed and distributed through food coopera-
tives. After the war the supervision of the NTO was transferred from the
Ministry of Commerce to the Ministry of Agriculture; this bureaucratic
change re¬‚ected and in¬‚uenced the state™s approach to the tea sector.
Policies were laid down to realign the regulatory system in order to
subsidize tea farmers and control prices for consumers. The NTO
bought tea leaves from farmers and sold them to tea factories, which in
turn resold the processed tea to the NTO, which was responsible for
selling it to packagers.
Meanwhile, the system of conditional imports that prevailed in the
prerevolutionary era and was supposed to have been reestablished by the
parliament in 1989 has been ostensibly replaced.46 Initially, the NTO
was allowed to import limited quantities of tea and to blend it with
domestic supplies. But over time various state organs and economic
zones (e.g. the army, foundations, and border cooperatives) acquired
˜˜special licenses™™ and exemptions to import foreign tea for ˜˜personal
consumption™™ or border bartering.47 These oligarchic privileges were
enhanced since their organizations were able to import tea with sub-
sidized foreign currency and by skirting import duties. The shadowy
nature of these operations has led the press to call these groups
˜˜plunderers™™ and the ˜˜tea ma¬a.™™ Even government of¬cials have
acknowledged the immense power of these organizations. When a for-
mer president of the NTO sidestepped the question regarding which
exact organs and foundations were involved in importing tea and, hence,
undermined the NTO™s supervision over the tea sector and attempts to
limit tea imports, the interviewer asked him why he talked about this
issue in a secretive manner. The former of¬cial fatalistically responded:
˜˜I have no fear, but it is not right to mention the names of these
in¬‚uential agencies, because these groups put the Tea Organization
under pressure. Unfortunately, their in¬‚uence on sensitive centers [of
power] is considerable. Sometimes, they even walk all over the opinions

A number of tea merchants argued that overproduction during the war years resulted in
the adoption of suboptimal picking techniques that have continued today.
Dawran-e Emruz, 5 Day 1379 (December 25, 2000).
There is much confusion over which agencies are authorized to issue import licenses,
and who in fact does issue them. Even after the recent liberalization of commerce and
the merging of responsibilities, ministers, parliamentarians, and the private sector
present contradictory claims regarding the licensing process. See Dawran-e Emruz, 24
Azar 1379 (December 14, 2000) and 15 Day 1379 ( January 4, 2001); Kayhan, 15
Ordibehesht 1380 (May 5, 2001); Entekhab, 29 Tir 1381 ( July 20, 2002).
Carpets, tea, and teacups 211

of the main authorities and guardians of this sector. At any rate there is
nothing that can be done.™™48
This new commercial system has profound consequences for the tea
market. Much of the tea imported through special means eventually
enters the tea market, with tea merchants in the Bazaar buying from
state-af¬liated middlemen once it has been imported by state af¬liates.
The limits on licenses and the privileged status of the state and quasi-state
organizations have led to increases in smuggling via border markets, free
trade zones, and the northwestern frontier.49 Again, Dubai is the new
entrepot in this process, with representatives of foreign tea companies
using their of¬ces to export to Iran through what a trader in Dubai called a
˜˜Swiss cheese border.™™ One indication of the role of Dubai in reexporting
tea to Iran is that from 1985 to 1994, the UAE tea import ¬gures rose 71
percent, but much of this was redirected to Iran.50 Tea smuggling existed
before the Revolution and was identi¬ed by government of¬cials as an ill
that had to be addressed. However, its magnitude and organization has
dramatically increased. Sources unanimously state that during much of
the 1990s roughly 60,000 tons of loose black tea, or two-thirds of the
consumption, was smuggled into Iran per year.51 Moreover, it has been
estimated that in the latter half of the 1990s, only 20 percent of the loose
tea that was imported into Iran was supervised by the NTO, which was
mandated to supervise the entire tea industry.52 By 2001, the situation
had worsened, and foreign packaged and loose tea comprised 80 percent
of the tea market, while 70,000 tons of domestic tea remained unsold in
the warehouses.53 Given such large ¬gures the unauthorized imports are
most likely due to activities by the privileged state af¬liates and smuggling
networks operating under the legal penumbra of the free trade zones.
The smuggling undermines state agents seeking to support domestic
producers and creates a transparent law-abiding commercial sector. It is
also costly for the state. Not only does the state lose customs revenue,
but subsidized hard currency is used to import a good that is domes-
tically produced and also subsidized by the state. The rise in smuggling
and general disarray in the market has had a number of consequences

Naw-Sazi, 18 Ordibehesht 1380 (May 8, 2001).
Pakistan™s restrictions on tea imports have also fueled the smuggling trade through Iran
and the Persian Gulf. Deutsche Presse-Agentur, February 1, 1995.
Ridwan Ali, Yusef Chaudhry, and Douglas W. Lister, ˜˜Sri Lanka™s Tea Industry:
Succeeding in the Global Market,™™ World Bank Discussion Paper no. 368 (Washington
DC: World Bank, 1997), 10. Also see Resalat, 1 Tir 1381 ( June 22, 2002).
˜˜Khosh Khat va Khal,™™ Eqtesad-e Iran, 360 (Bahman 1380 [ January-February 2002]):
11; Entekhab, 28 Khordad 1381 ( June 18, 2002).
Hamshahri, 10 Ordibehesht 1380 (April 30, 2001).
Bonyan, 25 Bahman 1380 (February 14, 2002).
212 Bazaar and State in Iran


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