IRAN: UNREST RATTLES BUSINESS CONFIDENCE, BUT OVERALL

S E C R E T SECTION 01 OF 02 RPO DUBAI 000261 NOFORN SIPDIS E.O. 12958: DECL: 6/24/2019 TAGS: PREL PGOV ECON IR SUBJECT: IRAN: UNREST RATTLES BUSINESS CONFIDENCE, BUT OVERALL ECONOMIC IMPACT LIMITED DUBAI 00000261 001.2 OF 002 CLASSIFIED BY: Kathleen A. McGowan, Acting Director, Iran Regional Presence Office, DOS. REASON: 1.4 (b),(d) This message was coordinated with Iran Watcher at Embassy Baku ¶1. (C) Summary: Other than the Tehran Stock Exchange's steep decline, the initial impact of the post-electoral unrest on the economy appears to be more psychological than real. Iran's oil production remains steady and major business centers open. Despite repeated rumors that the Mousavi-led opposition has called for a general strike, major work stoppages have not yet materialized although some small shops and businesses have reportedly closed temporarily. IRPO contacts cite government intimidation and the failure of the opposition leadership to issue clear-cut calls for a strike as the primary reasons the strikes have not gained traction. Still, our contacts note that a broad strike by a large swathe of the population across different sectors and regions is the opposition's best "trump card." Work stoppages in the petroleum sector would have the most immediate impact, our contacts say, and would shake the regime's confidence that it can ride out the wave of green. End summary. Strikes Gaining Little Traction So Far ¶2. (S) The potency of a strike as a political pressure tactic is not lost among the opposition's supporters or detractors, but there has been little indication to date that such a move could gain sufficient momentum to weaken the government's resolve to resist compromising over the results of the election. Iranian contacts of Watchers in Dubai and Baku who have shuttled back and forth in the past two weeks and foreign embassy personnel have reported few indigenous economic disturbances. Iran Watcher Baku contacts indicated that the major oil and gas sites, the Abadan, Tabriz, Esfahan, Kermanshah refineries, and all the pipeline areas appeared to be operating normally, albeit under heavier security than usual, during the period of greatest unrest in the cities. The status of bazaars throughout the country is less clear, but contacts say they have remained open for the most part. In particular, according to contacts of the Baku Watcher, the bazaar in Tabriz was open from last Thursday through Sunday, but reportedly closed early on Monday. �00A;Orumiyeh's was closed, but may now be open. Tehran's traditional bazaar has been open but closing before dusk, according to Dubai and Baku contacts and foreign diplomats posted in Tehran. Sporadic accounts from businessmen in Esfahan indicate that the main bazaar has remained open since the election, despite reports of violent clashes between demonstrators and security forces since the June 12 election. ¶3. (S) Our contacts do not believe that a large scale general strike will occur soon, and speculate that only highly provocative moves by the government would instigate a widespread strike. Many have noted that whether people will respond to a general strike, especially in the oil sector, will depend on the state of protests at the time the strike is called and who is perceived as calling for it. Baku sources contend that a clear call from Mousavi/Karroubi that is able to be disseminated will have maximum impact. However an Iranian business consultant in Dubai observed that most families' financial situations in Iran today are precarious and that many people do not have the savings to willingly forego their income for a sustained period. The consultant also noted that although some people he knows did not go to work last week out of solidarity with the demonstrators, many others likely fear government retribution. The Iran Watcher in Baku notes that his contacts in the energy sector are not certain that overwhelming numbers of petroleum workers would heed calls for general strike. Iranian energy businessmen in Tehran and other cities told Baku Watcher that the strike option has been suspended as a last line of defense move. All indicated that there was talk of closing bazaars earlier this week, but that Mir Hossein-Mousavi has asked the bazaaris to hold back until he gives the word. Iranian professors from Mashhad, Qom, and Tehran and an industrialist in the oil sector earlier this week suggested that a massive strike was unlikely because it would undermine what they view as the peaceful tone of the reformists' campaign. DUBAI 00000261 002.2 OF 002 ¶4. (C) Sporadic internet reports of industrial work stoppages are difficult to confirm. An Iranian blog claimed that Iran Khodro workers stopped work on June 18 out of solidarity with people in the streets, but our contacts were unaware of the effort, indicating it did not get much attention. The Syndicate of Workers of Tehran and Suburbs Vahed Bus Company plan to use June 26, previously "Justice for Iranian workers day," to call on the government to protect civil rights and condemn violence and oppression in light of the recent crackdown. Private Sector Rattled, but Likely Resilient ¶5. (C) Steep declines and the continuing volatility of the Tehran's Stock Exchange (TSE) suggest that unrest ignited by the election has shaken investor confidence inside Iran. The TSE fell 116 points between June 14 and 22 before regaining 88 points on June 23. Although state domination of the bourse prevents it from being a true equities exchange, business contacts note it is a good measure of the business community's confidence in the economy. On June 22 the head of the TSE announced pending legislation that would offer significant tax exemption to shareholders who decrease their turnover of shares. This is likely an incentive to people to leave their money in the market. ¶6. (S) One factory owner from Tehran said that he has had a hard time getting his products through customs and is warning customers that he accepts no responsibility for any delivery disruptions, although he has not yet experienced any. Two other small business owners noted that the business climate has been grim since the election. Yet our business contacts also remind us that Iran's economy in general, and the relatively small private sector in particular, have survived many past crises. Oil Sector Safe for Now ¶7. (U) By all accounts, Iran's oil sector remains stable. Iran exports approximately 2.4. million barrels of oil per day, and its oil and gas sites-which are distant from major urban centers-have maintained normal production, according to market data. A Dubai contact recently in Iran noted that he did not observe any unusual activity or talk of shortages at the gas stations in Tehran. StatoilHydro-a Norwegian company active in Iran's lucrative South Pars Gas Field-shut its Tehran office on 16 June because of nearby street protests, and as of 18 June was giving its Norwegian workers and families the choice to leave, according to Western press. StatoilHydro and Schlumberger spokespersons on 18 June however said that business is operating as usual. Economic Red Lines for the Regime ¶8. (S) Comment: Significant economic pressures would almost certainly worry the regime. A large bazaar strike similar to the closure in protest of the VAT last October and those leading up to the Revolution would no doubt grab the regime's attention. Historically, bazaar closures are the requisite first step to larger, more coordinated strikes backed by the financial clout of the business community. The strike last October, which originated in Esfahan, demonstrated that the close-knit relations essential for uniting the bazaar and engaging it in collective action still exist. Since the revolution however, the bazaar has engaged in political action only because of economic apprehension. It is unclear whether the opposition's political statement is resonating with the bazaar. A business contact in Dubai perceives a lack of cohesion within the bazaar but said that if there was broad participation throughout the country, many would be more likely to participate. End comment. MCGOWAN