HITTING THE PERSIAN POCKETBOOK: IRAN INFLATION

C O N F I D E N T I A L SECTION 01 OF 04 BAKU 000942 SIPDIS E.O. 12958: DECL: 12/10/2019 TAGS: ECON EFIN SNAR PGOV AJ IZ IR SUBJECT: HITTING THE PERSIAN POCKETBOOK: IRAN INFLATION SURGE SURVEY Classified By: ROB GARVERICK, POLECON COUNSELOR, REASONS 1.5 (b and d) Introduction -------------- ¶1. (C) The magnitude of inflation in Iran and the reliability of Iranian government inflation and income statistics are long-standing matters of dispute among Iran watchers within and without the USG. This cable attempts to clarify these issues by providing the results of an informal salary and price survey of over 30 Iranian workers and consumers, comparing the period June/July, 2009 to November 2009. ¶2. (SBU) While only Tehran salaries were surveyed, June-November bazaar prices for a basket of goods in four cities (Tehran, Ardebil, Anzali, and Kermanshah) were surveyed by town residents (including a Tehran-based economist) working in tandem with Baku-based Iranians. Survey results suggest that substantial price inflation, ranging from between about 15 to about 66 percent, occurred during the six month period. Prices for red meat, tea, lower-end cooking oil, tomatoes, potatoes and bread all surged significantly (though the latter from a very low base),while domestic versus imported rice prices also increased dramatically. ¶3. (SBU) Most salaries during this period were stagnant, though there are persistent reports of increased salary non-payment and unemployment in certain laboring sectors, including sugar refineries and automobile factories. A professional from Karaj (a city not far from Tehran) claimed that factory salaries in her city had remained stuck at 2000 Tomans per month ($200 in current dollar equivalent) for more than two years. She also claimed small apartments in a middling area of Karaj rent for 10 million Tomans (over $18,000) per year, far out of reach for most families (see septel on housing issues). ¶4. (SBU) The extent and implications of recent inflation in the price of basic consumer goods has also been a matter of voiced concern within some policy circles inside Iran, including government and political figures, and the conservative newspaper Keyhan. The semi-official Iranian Labor News Agency (ILNA) reported in late November, 2009 that the price of chicken has risen 20 per cent over the past year, while the price of eggs increased by fourteen per cent; our survey of chicken price trends is in keeping with this estimate. Referring to price inflation, plant 
closures, and other economic strains, the pro-government web site Alef observed in late August, 2009 that "the blue collar" may prove more threatening to future stability than "the green wristband." End Introduction. Price Variations -------------- ¶5. (U) Monthly income and bazaar prices for basic goods can vary significantly from city to city in Iran based on local supply and other factors. The major exception is state civil servants, whose official salary is standard throughout the country. Most salaries remain constant throughout a given year, and are not adjusted for inflation (if they are adjusted at all) until the subsequent year. The overview of current salaries was obtained from and/or checked with sixteen Tehran region residents, including at least one member of each of the enumerated categories. ¶6. (C) The estimated salaries and bazaar prices were also checked with Baku-based Iranians and/or visa interviewees, and compared against Baku-area dollar-equivalent salaries and prices for the same work categories and products. The latter research indicates that base salary dollar equivalents for construction and unskilled workers are higher in Baku, but salaries for professionals and teachers are lower (it is unclear how off-budget income from bribes (common in Baku) might affect this comparison). Current Baku prices for the basket of goods are lower than Tehran's, but close to those cited for Ardebil (see section II below). ¶7. (U) Dollar equivalents are based on the December 2, 2009 official exchange rate of 10,000 Iranian Tomans = US $10.087. ¶I. Tehran Region Salaries: Tomans per Month -------------- Category Monthly Salary -------------- -------------- Medical and Health Workers (includes Nurses, but not Doctors) T300K / $303 High School Teachers T350K / $353 Agricultural Technicians (except advanced agronomists) T250K / $252 Construction Workers Salary Range (Blue Collar Only) T200K-500K/$202-$504 Skilled Factory Workers T350K / $353 Unskilled Workers T200K / $202 Municipal Workers T250K / $252 Tehran's Highest Paid Workers T1 Million/$1009 (The last category reflects base salaries for high-ranking Police Officers and other security personnel, Majlis Deputies, University Professors, Senior Local Government Officials, Director of State Companies, Trading Company and Real Estate Company Managers, and experienced Doctors. Lawyers, Engineers, Architects, and other professionals make more or less than this benchmark, based on their status.) II. Food Prices Comparison -------------- The following table compares July, 2009 and November 2009 Tehran bazaar prices in four cities for a basket of specified basic commodities. Information was provided by Iranian residents of these towns who personally visited their local bazaar with the pre-assigned list. The on-site participants did not know that the information obtained would be shared with an American official. The information was supplemented and checked against research information provided by a Tehran-based economist and by Baku Iran watcher interviews of an assortment of Iranian visa applicants and business people in Baku. (Note ? Prices are converted from Iranian Tomans to dollar equivalents using December 2, 2009 exchange rates. Price ranges reflect commodity quality differences, e.g., "worst quality" versus "best quality" rice. End Note). ¶A. Tehran City Price Trends -------------- June, 2009 Nov. 2009 % Commodity Price Price Change -------------- -------------- -------------- -------------- Imported Rice (Range per Kilo) $1.82-$2.42 $2.29?$2.72 +26-+12% Domestic Rice (Range per Kilo) 2.32-$3.53 $2.52-$4.04 +9-+14% Lamb (per Kilo) $9.08 $12.11 +33% Beef (Kilo) $8.58 $12.11 +41% Chicken (Kilo) $2.52 $2.93 +16% Cooking Oil Range (one liter) $1.21-$2.32 $1.72-$2.83 +42-+22% Tomatoes (Kilo) South Tehran - North Tehran $0.30-$0.60 $0.40-$0.71 +33-+18% Tea (Kilo) $3.53-$6.56 $4.54-$7.06 +29- +8% Cube Sugar $0.81 $0.91 +12% State Bread* (450 gm)$0.06 $0.08 +33% Bakery Bread (450 gm)$0.35 $0.40 +14% Potatoes (Kilo) $0.30 $0.45 +50% Onions (Kilo) $0.50 $0.61 +22% (Note: A professional from Karaj claimed that in June, 2009 the price of onions in her town surged to over $1.20 per kilo. End Note.) ¶B. Ardebil City Price Trends -------------- June, 2009 Nov. 2009 % Commodity Price Price Change -------------- -------------- -------------- -------------- Imported Rice (Range per Kilo) $1.31-$1.61 $1.51-$2.02 +15-+25% Domestic Rice (Range per Kilo) $1.82-$3.03 $2.02-$3.29 +11-+19% Lamb (per Kilo) $7.06 $10.09 +42% Beef (Kilo) $6.05 $8.57 +42% Chicken (Kilo) $2.02 $2.52 +25% Cooking Oil Range (one liter) $1.21-$2.02 $1.92-2.32 +59%-+15% Tomatoes (Kilo) $0.15 $0.25 +66% Tea Range (Kilo) $3.03-$5.04 $4.35-$6.05 +44-+20% Cube Sugar (Kilo) $0.76 $0.81 +7% State Bread* (450 gm) $0.02 $0.025 +25% Bakery Bread (450 gm)$0.30 $0.40 +33% Potatoes (Kilo) $0.65 $0.40 (-39%) Onions (Kilo) $0.35 $0.50 +43% Note: Ardebil is a center of potato production, and local retail price tend to be relatively cheap. Sources report that the high June price is anomalous and reflects a temporary local scarcity caused by the purchase of large quantities of potatoes by President Ahmedinejad for free distribution "as a personal gift" to certain poor villages elsewhere in Iran. End Note. ¶C. Gilan (Anzali City) Price Trends -------------- June, 2009 Nov. 2009 % Commodity Price Price Change -------------- -------------- -------------- -------------- Imported Rice (Range per Kilo) $1.92-$2.12 $2.22?$2.62 +16-+24% Domestic Rice (Range per Kilo) 2.42-$2.52 $2.82-$3.23 +17-+33% Lamb (per Kilo) $9.89 $11.96 +21% Beef (Kilo) $9.09 $10.09 +11% Chicken (Kilo) $2.52 $2.93 +16% Cooking Oil Range (one liter) $1.31-$1.82 $1.82-$2.22 +22-+22% Tomatoes (Kilo) $0.81 $1.01 +25% Tea (Kilo Cheapest) $4.03 $4.54 +13% Cube Sugar $0.86 $1.01 +17% State Bread* (450 gm)$0.03 $0.05 +66% Bakery Bread (450 gm)$0.20 $0.30 +50% Potatoes (Kilo) $0.40 $0.55 +37% Onions (Kilo) $0.30 $0.50 +66% ¶D. Kermanshah (Iraqi Border) Price Trends -------------- June, 2009 Nov. 2009 % Commodity Price Price Change -------------- -------------- -------------- -------------- Imported Rice (Range per Kilo) $1.21-$2.54 $1.53-$2.62 +26- +3% Domestic Rice (Range per Kilo) $2.02-$4.54 $2.52-$6.05 +25-+33% Lamb (per Kilo) $9.08 $11.10 +33% Beef (Kilo) $8.07 $10.09 +25% Chicken (Kilo) $2.32 $2.93 +26% Cooking Oil (one liter cheapest) $1.21 $1.82 +50% Tomatoes (Kilo) $0.50 $0.71 +42% Tea (Kilo) $3.53-$6.56 $4.54-$7.06 +29%-+8% Cube Sugar No Data $1.01 State Bread* (450gm)$0.07 $0.09 +28% Bakery Bread (450gm)$0.40 $0.40 +0% Potatoes (Kilo) $0.40 $0.61 +52% Onions (Kilo) $0.61 $0.81 +33% ¶8. (SBU) Sources note that retail prices are often affected by smuggling (both to and from Iraq) across the Iraqi border. This effect is allegedly more severe in Kermanshah than in the other three cities, and is allegedly reflected in consumer prices. Imported Rice comes mainly from Pakistan and Thailand. It is universally cheaper than (better quality) domestic rice. Iranian sources claim that large amounts of imported rice and flour is smuggled via Iraqi border routes originating in Basra and Iraqi Kurdistan. ¶9. (U) *Note: The Iranian government provides cheap, low quality bread at outlets targeting the poorer population. Interlocutors report frequent long waits and shortages at these stores, with no such problems at the higher quality (and more expensive) private bread bakeries, which are favored by the middle class and above. End Note. LU