IRANIAN TOURISM: AN OPPORTUNITY FOR LEVERAGE?

C O N F I D E N T I A L SECTION 01 OF 05 ISTANBUL 000557

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E.O. 12958: DECL: 10/31/2023
TAGS: PREL PGOV PINS ECON EINV CVIS SCUL SOCI TU IR
SUBJECT: IRANIAN TOURISM: AN OPPORTUNITY FOR LEVERAGE?

REF: A) ISTANBUL 146 B) ISTANBUL 85 C) ISTANBUL 438
D) ISTANBUL 152

Classified By: Deputy Principal Officer Sandra Oudkirk; Reason 1.4 (d).


1. (C) Summary: Iran is making a strong diplomatic push to
promote tourism cooperation with Turkey and "friendly"
organizations like the D8 and the Economic Cooperation
Organization (ECO). Iran sees tourism and related investment
as a way to ease its isolation and boost economic growth, and
thus has eased tourist visa requirements for some countries
and has pledged tax-free status for such investments.
However, the response from investors in Turkey and elsewhere
has been muted, according to contacts, because of Iran's
risky investment climate and because the GOI refuses to
better manage its tourism sector. A tourism contact told us
the Iranian tourism industry holds little hope for large
foreign investment.


2. (C) Summary, continued: At the same time, tourism in the
other direction -- from Iran -- is growing. Turkey is a key
destination, expecting to host over 1,000,000 Iranians in
2008, and even more in future years. For many Iranians
travel to Turkey and the west is a "psychological safety
valve" allowing access to both western consumer products and
freedoms. Comment: Iranian tourism industry contacts affirm
that Iranians who visit the U.S. usually return home with
"energized hopes" for better relations with the west and more
freedom at home, a sentiment some predict could spread in
Iranian civil society at a pace relative to Iranian travel
opportunities to the West. Iranian tourism abroad may thus
offer useful leverage for raising pressure on the regime.
End Summary.

Tourism in Iran: Facts and Projections
--------------


3. (SBU) Numbers low and holding steady: According to the
UN's World Tourism Organization (UNWTO),the Iranian Cultural
Heritage, Handicraft, and Tourism Organization (ICHTO) --
Iran's equivalent of a Ministry of Tourism -- reported that
some 1,820,000 foreigners visited Iran in 2007, some
1,858,000 are estimated to visit in 2008, and 1,900,000 are
projected to visit in 2009. (These figures do not
differentiate between conventional tourists, business
visitors, or pilgrimage visitors, suggesting that foreign
tourists visiting Iran make up only a portion of this
figure.) According to the same ICHTO report, GOI
expenditures on tourism in 2007 were 1.61 billion USD; are
expected to reach USD 1.69 billion in 2008, and projected to
drop slightly to USD 1.63 billion in 2009. At the same time,
Iran's revenues from tourism during the same time period were
noticeably less: USD 1.07 billion in 2007; USD 1.11 billion
in 2008, and a projected 1.08 billion in 2009.


4. (SBU) GOI policy and target goals with regard to tourism
were set in Iran's current Five Year Economic and Development
Plan (2005-2010),approved by the Majles in 2004. That plan
calls for Iran to take in USD two billion in tourism revenues
by 2010. Iran's longer-term goals vis-a-vis tourism are
addressed in the GOI's "20 Year Outlook Plan" (2005-2025),
which sets a goal of 20 million foreign visitors to Iran by
2025, bringing in USD 15 billion in annual revenues for the
GOI and attracting USD 32 billion in tourism infrastructure
projects and investments, according to press reporting.

An Iranian diplomatic press on tourism
--------------


5. (C) Iran has been making a strong diplomatic push over
the past six months to promote tourism cooperation with
"friendly" countries like Turkey, and "friendly"
international organizations like the D-8 Developing Nations
and the Economic Cooperation Organization (ECO). A partial
list of recent Iranian diplomatic activity and/or policy
speeches focusing on tourism cooperation and attracting
foreign investment in Iranian tourism, according to press
reports and contacts, includes:

-- President Ahmadinejad, Foreign Minister Mottaki, ICHTO
Director (and Vice President) Rahim-Mashaei, Economy Minister
Danesh Jaafari, and then-Central Bank Director Mazaheri
hosted UNWTO Secretary-General Francesco Frangialli at an
August 27 "International Conference on Investment
Opportunities in Iran." Ahmadinejad affirmed that Iran sees
tourism as both an important source of budgetary revenue and
as "a strategic bridge which joins nations together." He
pledged to give higher priority to encouraging privatization
of Iran's tourism sector and offered a range of benefits to
foreign companies willing to invest in that sector, including

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treating large investments with the same rules that apply to
Iran's "free trade zones" (e.g., 15 years tax exemption,
eased visa and customs restrictions),while Mazaheri pledged
that Iran's "Export Promotion Bank" would offer modern
banking services and credit financing to all investors.
ICHTO also announced the creation of a website dedicated to
encouraging tourism investment in Iran, at www.cito.ir, which
includes a database of Iranian tourism-related projects in
need of foreign investment.

-- Majles Speaker Larijani, visiting Persepolis and Shiraz on
October 11, told the Iranian press that he plans to press the
Majles to give more attention to improving Iran's tourism
sector. He argued that Iran should be able to attract as
many tourists as Greece or Egypt, and acknowledged that Iran
needs to improve its tourism infrastructure to "provide
appropriate facilities in our country." He said he will ask
the Majles to draft revised tourism objectives as part of the
"20 Year Outlook" plan.
-- Tourism Ministers from ECO (Ref A) member states
Afghanistan, Turkmenistan, Kazakhstan, Azerbaijan,
Tajikistan, Turkey, Pakistan, and Uzbekistan, hosted by ICHTO
Director Rahim-Mashaei, met in Tehran on October 20 to
discuss how to promote tourism within ECO member states.
According to press reports, they discussed easing visa
restrictions for member state citizens traveling for tourism,
and encouraged ECO states to invest in each other's tourism
industries.

-- In August, Iranian President Ahmadinejad visited Istanbul
and signed a bilateral agreement with Turkey to promote
tourism between the two countries (ref C). ICHTO Projects
Director Mehdi Jahangiri opened an Iranian Tourism
Information Office in Istanbul on October 10.

-- Tourism Ministers from D8 member states (ref B)
Bangladesh, Egypt, Indonesia, Malaysia, Nigeria, Pakistan,
and Turkey met in Tehran and Esfahan on May 12-16, hosted
again by ICHTO Director Rahim-Mashaei, for similar
discussions on promoting tourism within the D8 states. On
May 17 Mashaei announced that that Iran would no longer
require visa for tourism-related visits of less than 15 days
for D8 member state citizens. Iran called on D8 member
states to offer visa reciprocity, but to date only Turkey has
done so, while Pakistan has pledged to do so this year,
according to D8 Executive Secretary Kia Tabatabae.

-- Also in May, ICHTO announced that it had opened "foreign
investing offices" in Bahrain, Germany, Italy, and Spain, to
market Iranian tourism more effectively and promote
investment in Iran's tourism infrastructure.

-- Since the start of the Iranian new year in late March, the
Iranian MFA has offered electronic visa application services
at the MFA's website (www.mfa.gov.ir.) According to the
Iranian press, 250,000 tourists visited Iran since March
using e-visas. (Comment: We tried numerous times over the
past week to access this website but it currently appears
inoperative.)


6. (C) According to Dr. Roxana Faghri (protect),an Esfahan
University professor who informally advises ICHTO, the GOI
over the past year has recognized that it must make a more
intensive effort to attract foreign tourists and foreign
tourism investment to have any hope of reaching its
development plan targets. Faghri confirmed that Iran sees
tourism and tourism-related investment as a way to ease its
isolation and boost economic growth. The collapse of oil
prices since September have heightened the urgency that many
GOI policymakers now feel about the need to diversify GOI
revenue sources, as well as to mitigate against Iranian
economic and political isolation.

But Not Enough?
--------------


7. (C) Despite its active "tourism diplomacy" and the lofty
tourism-related targets of its budget plans, the GOI refuses
to take critical steps to make its tourism sector more
appealing to foreigners, according to Faghri. She told us
that she sent ICHTO in early 2008 a proposal with 15
recommendations for improving GOI management of Iran's
tourism industry, including: Appointing ICHTO liaisons in
every GOI Ministry to ensure a uniform GOI approach; issuing
a "Code of Ethics" laying out standard practices for
providing tourism services; decentralizing and privatizing
the tourism sector; offering "tourism management" courses in
business schools and "tourism customer service training" in
vocational schools; undertaking environmental and social
impact studies when considering infrastructure projects; and

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coordinating tourism marketing activities with regional
organizations and neighboring countries, including Turkey.
To Faghri's frustration, the only recommendations ICHTO has
acted on are issuing a rudimentary Code of Ethics that
"simply tells hotels and restaurants to treat tourists like
welcomed guests", and holding regional tourism discussions
within the ECO and the D8 as described above.


8. (C) The response from foreign investors to Iran's appeals
for tourism investment appears to be muted. A contact in the
Istanbul-based Turkish-Iran Business Council told us that
Turkey's Foreign Economic Relations Board (DEIK) has led
numerous business delegations to Iran in the past several
years (ref D) that included tourism and hotel companies, but
that only one significant deal has ever been agreed -- the
Turkish hotel group Dedemon agreeing to open a 200-bed hotel
in Shiraz in 2009, even though it will not profit from the
deal for at least several years. "Doing business with Iran,
in tourism or almost any other sector, is too much trouble
for most Turkish small and medium enterprises. The
investment climate is too risky, and the Iranians sometimes
negotiate in bad faith."


9. (C) Our business contact told us that Iran recently
appealed to DEIK and Turkey's Chamber of Commerce (TOBB) to
do more to encourage tourism investment in Iran. DEIK has
agreed to put together a delegation of Turkish companies to
participate in the "Second International Conference on
Investment Opportunities in Iran Tourism Industry", November
8-9 in Tehran, but our contact was skeptical that any
commercially viable opportunities would be on offer.
(Comment: Our contact promised to share a readout of that
conference after it occurs.) His skepticism was shared by
another contact who runs a high-end Iranian tourism company
that brings wealthy Iranians to the EU and U.S and less
frequently brings European tour groups to Iran. He confirmed
that the Iranian tourism sector holds little hope for
large-scale western investment in Iran, at least until UN
sanctions are lifted and relations with the west improve.

Iranians traveling abroad: a "safety valve"...
-------------- -


10. (C) Although the primary GOI interest in tourism is to
increase revenue and investment coming to Iran, it also
perceives a benefit in allowing Iranians to travel abroad
relatively freely, according to the tourism company owner.
"The government realizes that the Iranian people do not want
to feel isolated, so they do not raise unnecessary hurdles to
allowing Iranians to travel abroad." The tourism company
owner said that while the U.S. was by far the most prized
destination, the difficulties of acquiring a US visa and the
expense of travel to the US limited the numbers of Iranians
able to go.


11. (C) For most Iranians, occasional trips to Dubai,
Azerbaijan, and especially Turkey are affordable and thus
popular. For the GOI, "Turkey is the least bad destination
for Iranians" the tour company owner told us, "because they
do not require visas; Iranians can get there by car, train,
or plane; the culture and religion are relatively familiar,
and visitors can still buy and bring back any western product
they need." He said the regime implicitly accepts Iranian
tourism to Turkey as a necessary social "safety valve",
without which the population's resentment of the current
economic woes and social restrictions would dramatically rise.


12. (C) According to Gunnur Ozalp, the Secretary-General of
TURSAB, Turkey's tourism industry association, over one
million Iranians visited Turkey in 2007, with up to 1,100,000
expected in 2008, and more in 2009. Iranian tourists are
"good business", TURSAB Corporate Affairs director Ela Atakan
added. They usually come on chartered tour groups, typically
visiting Istanbul, Antalya, or Izmir (the latter two for the
beaches). Iranian tourists typically "bring lots of cash,
and bring back to Iran lots of clothing, household goods,
western films, books, and music, and other consumer goods."
Many also come for "western cultural events." Atakan
recounted that she had seen many Iranians among the crowds
that attended concerts by American rock bands Metallica and
REM recently in Istanbul. "To us, Iranian tourism is just
business, nothing sentimental or political. The EU and U.S.
should support it too, because it is the best way to share
our modern values and culture directly with the Iranian
people."


13. (C) Ozalp noted that Turkish tourists do not have a
corresponding interest in visiting Iran. She confirmed that
Iran lacks a basic tourism infrastructure, with many hotels
and restaurants unable to accept credit cards; almost no bank

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machines available; and poor standards of cleanliness and
customer service at most hotels. 30 to 40 Turkish tour
companies offer tours to Iran, she said, but these appeal
largely to "niche tourists" who want to visit Iran's UNESCO
heritage sights. "Most average Turks would rather go to
Europe or America for their vacation."

...Despite the Occasional Embarrassment
--------------


14. (C) Iran and Turkey inked a bilateral civil aviation
agreement in 2007, Ozalp explained, that allowed Iranian
charter flights to fly to Turkish coastal airports in
Kusadasi and Antalya. But GOI embarrassment in summer 2007
over a spate of photographs posted to Iranian websites
showing bikini-clad Iranian women on Turkish beaches mingling
with men prompted the GOI to modify the agreement, canceling
the beach-bound flights. Instead, Iranian beach-goers
typically now fly to Izmir or Isparta (reportedly removing
their chadors, hejabs, and manteaus the moment the aircraft
enters Turkish airspace),and take buses to the beaches. One
Iranian told us that some Iranian charter flights have
quietly resumed flying to Antalya, but intentionally misspell
Antalya in their advertising (spelling it "Annalya" in FARSI,
by simply erasing a dot over the "t") to avoid provoking a
GOI clamp-down. According to Ozalp: "Our cultural freedom is
the one aspect of allowing Iranian tourism in Turkey that the
Iranian government has a hard timing swallowing. But they
do."


15. (C) Our TURSAB contacts recounted an equally embarrassing
incident for the GOI in January 2007, when ICHTO Director
Rahim-Mashaei was filmed applauding a female dance
performance at an Islamic tourist exhibition in Istanbul.
When the film was posted to Iranian news websites, the
websites were shut down and their owners detained.
Rahim-Mashaei claimed the video clip of him applauding was
faked, insisting he was offended by the dancing. (Comment:
The gaffe-prone Rahim-Mashaei most recently got in hot water
with the Majles after suggesting in a speech in July that the
Iranian people have no enemies, including even the Israeli
and American people. Under intense pressure, including from
Supreme Leader Khamenei, he retracted his remarks.
Throughout the Iranian media frenzy he was fully supported by
Ahmadinejad, whose son is married to Mashaei's daughter. End
comment.)

More travel for Iranians = more pressure on the regime
-------------- --------------


16. (C) The Iranian tour company owner said he and his
industry colleagues see a very rewarding future in leading
Iranian tours to the EU and U.S. He pleaded to Istanbul's
Iran Watcher (comment: not un-self-servingly) for greatly
expanded travel and exchange opportunities for Iranians to
visit the U.S. He suggested, for example, the creation of a
new J-1 visa program under which "hundreds or even thousands"
of Iranian high school students could go to the U.S. on a
several-month work/study program, living with American host
families, "including Iranian-American families." He argued
that "high school students don't pose the same security
background problem to you, and this experience would help
mold their views of America in a deeper and more long-term
way than just watching movies or listening to VOA." He
assessed that when "younger generation Iranians return from
visits to America, they almost always return with energized
hopes for more normalized relations with you."


17. (C) Numerous Iranian contacts in the tourism industry
and in other sectors have pleaded for urgent action by the
USG to ease the process for Iranians applying for U.S. visas.
"It is so time-consuming and expensive to travel twice to
Dubai, or Ankara, or Istanbul, each time for several days,
just to get a one-entry visa. Even if we get the visas, the
process leaves a bad taste in the mouth", a Tehran
businessman recently said, reflecting a consensus view among
most Iranians. The tour company owner posited that the USG
could generate significant popular goodwill in Iran by taking
"any number of friendly steps", including: offering visa
interviews for Iranians in Iran; offering multiple entry
visas; allowing Iranians who have been approved to mail their
passports to Dubai or Turkey visa issuance; or by allowing
direct flights between Tehran and U.S. cities. "Any of those
steps would have a great effect on the Iranian public's
morale."

Comments
--------------


18. (C) Iran's strong diplomatic push to promote tourism

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cooperation with Turkey, the D-8, the ECO, and others,
appears to have achieved little of significant economic
benefit for the regime, so far. This is no surprise given
the risky investment climate and the regime's unwillingness
to change the way the tourism sector is managed.


19. (C) However, we believe another aspect of Iranian tourism
bears closer scrutiny and may offer leverage for pressuring
the regime: Iran's implicit reliance on Iranian travel
abroad as a psychological "safety valve." The local and
Iranian experts with whom we spoke shared the view that the
benefits of Iranian tourism abroad accrue not to the regime
but to the Iranian people. They argued that taking steps to
ease and increase Iranian tourism to Turkey and the west
would be a financially and politically low-cost way of
effectively generating more grassroots support within Iran
(and thus raising domestic pressure on the regime) for both
engagement with the West and greater freedom at home.


20. (C) We are not in a position to judge the merits of
specific proposals, like the one from the tour company owner,
to create new exchange programs for Iranian students or other
segments of Iranian civil society. But based on our
experiences interacting with Iranians in Turkey, we tend to
agree with the conclusion that expanding opportunities for
Iranian citizens to travel to the United States would
directly support USG policy goals via-a-vis reaching out to
and supporting the Iranian people.
WIENER