IRAN: RURAL INDUSTRIALIST PESSIMISTIC ON AGRICULTURE,

C O N F I D E N T I A L SECTION 01 OF 02 RPO DUBAI 000281 SIPDIS E.O. 12958: DECL: 7/9/2019 TAGS: PGOV PREL EAGR ECON ETRD IR SUBJECT: IRAN: RURAL INDUSTRIALIST PESSIMISTIC ON AGRICULTURE, POSITIVE ON ECONOMY DUBAI 00000281 001.2 OF 002 CLASSIFIED BY: Timothy Richardson, Acting Director, Iran Regional Presence Office, Department of State. REASON: 1.4 (b),(d) ¶1. (C) Summary: A fertilizer factory owner who was applying for a visa in Dubai recently spoke with IRPO regarding Iran's agriculture sector, the role of economics in the presidential election, and subsidy reform. He considered Iran's water shortage and limited access to capital for fixed investments the main challenges facing Iran's agriculture sector. He knewseveral colleagues who supported Mahmoud Ahmadinejad because of the financial assistance the president has provided to the provinces, and he suspected that many rural Iranians voted for Ahmadinejad because they did not know what kind of economic benefits to expect from the other candidates. He did not think unemployment and inflation are worrisome and supported subsidy reform because it will allow him to sell his fertilizer at a higher price. He also said that Iranians are ready for a complete elimination of gasoline subsidies but denigrated the current proposed legislation. End Summary. ¶2. (C) The agricultural industrialist, who owns a factory in Kerman Province that produces pistachio fertilizer, employs 53 workers and is a member of the Kerman Chamber of Commerce. He has a degree in Chemical Engineering, and as the father of three university-educated children, he likely is better off financially than most Iranians. His main clients are domestic and include the government, but his chamber membership has afforded him international contacts, specifically in the U.S., Germany, and Turkey. The Problems of the Agriculture Sector -------------- ¶3. (C) The industrialist said that the key problems of Iran's agriculture sector are the ongoing, three-year drought and the lack of access to capital to purchase equipment. The drought has hit agriculture hard. The pistachio is one of the most resistant crops to drought, but this year, even pistachio farmers are having difficulty. This was compounded by farmers' having to compete with cheaper U.S. pistachio imports (Note: Certain U.S. agricultural products, including pistachios, can be legally exported to Iran with a license from the Treasury Department's Office of Foreign Assets Control). The government's main response to the water shortage is building dams, but the factory owner derided this effort, as the droughts weaken the dams' effectiveness. (Note: Iran frequently lauds its dam construction projects, which according to Iranian press number the highest in the world.) The government is also building irrigation systems, which have helped some, but he said there are few infrastructural improvements the government can implement to ease the drought. He said the agriculture sector further suffers from inefficient and outdated equipment and without investment, there is little the government can do to compensate for the deficiency. Not Buying the Anti-Ahmadinejad Rhetoric on the Economy -------------- -------------- ¶4. (C) The industrialist viewed the emphasis on the economy in the election as more about attacking other candidates rather than improving it, and he noted that none of the candidates focused on Iran's agriculture sector. When asked about the Ahmadinejad-Rezai debate -- the vast majority of which focused on the economy -- he maintained that their discussion of the economy was merely a political tool. He was more focused on his daily operations, loans, and taxes. On unemployment and inflation, he said, "Prices go up and down for different things, but this is normal", and he claimed to have heard few complaints about unemployment.(Comment: As a financially successful business owner, he and his social circle are more insulated from job shortages and can better afford rising prices. Additionally, Kerman Province, whose economy is largely based on agriculture and whose workforce includes a large portion of Afghan migrants, enjoys a lower rate of unemployment than the rest of Iran.) ¶5. (C) He suspected that many rural Iranians voted for Ahmadinejad because they knew they could expect financial assistance from him and did not want to risk electing a candidate whose plans were unknown. Although there were small protests in Kerman immediately following the election, they DUBAI 00000281 002.2 OF 002 fizzled out quickly and did not affect his business' operations. He noted, however, that Kerman is known in Iran as a relatively quiet province. Subsidy Reform Good for Business -------------- ¶6. (C) The industrialist believed that Iranians are ready for subsidy reforms and views legislation as necessary and beneficial. He complained that the government's basic fertilizer subsidy prevents him from selling his product at a higher price. Among his colleagues, this was a main reason for their support for cutting subsidies. He also supported cutting water and electricity subsidies to reduce consumption and allow fairer competition. Nevertheless, he criticized the targeted subsidy legislation currently being considered by the Majles because he does not believe that replacing subsidies with cash payments is meaningful reform or progress. ¶7. (C) Comment: The fertilizer factory owner's consistent downplaying of unemployment and inflation is unique in light of the focus on the economy during the election. As an educated business owner, his perspective underscores the difference in how Ahmadinejad's economic policies may be viewed in large urban and industrial areas, like Tabriz and Tehran, versus slower and more agricultural cities, like Kerman. End Comment. RICHARDSON