IRAN: THE POLITICS OF BREAD

C O N F I D E N T I A L SECTION 01 OF 02 RPO DUBAI 000361 NOFORN SIPDIS E.O. 12958: DECL: 8/31/2019 TAGS: PGOV ECON IR SUBJECT: IRAN: THE POLITICS OF BREAD DUBAI 00000361 001.2 OF 002 CLASSIFIED BY: Alan Eyre, Director, Iran Regional Presence Office, DOS. REASON: 1.4 (b),(e) ¶1. (C) Summary: Traditional flat breads are a staple of the Iranian diet and offer a window into the problems of Iran's economy. Iranians eat flat bread daily, particularly 'nan-e sangak', and its importance has made bread prices a political issue, particularly as prices have doubled since approximately March of this year. In the past, rises in bread prices have caused widespread unrest and even the occasional riots, most notably in 1995. Bread prices are often a topic in state-run news broadcasts and the IRIG controls prices both via a subsidy for flour and by actively monitoring the price stores and bakeries charge for their bread. The flour subsidy gives bakeries-both larger, modern bread factories and the traditional producers-flour at about 15 percent of the price for store-bought flour. Subsidized prices also create a black market for flour, which the IRIG fights with prison terms for those caught illegally re-selling subsidized flour and also by closing down some of the traditional producers, whose inconsistent daily production is alleged to feed the black market. End Summary. ¶2. (C) IRPO recently spoke with a Tehrani bread factory owner, who discussed bread preferences, prices, and the importance of bread in Iran. The Importance of Iran's Traditional Breads... ¶3. (C) Traditional flat breads have long been a staple of the Iranian diet; there are several different versions, reflecting regional differences and individual preferences. The baker we spoke with said 'nan-e sangak' (a plain rectangular or triangular whole wheat sour dough flatbread) is the most popular bread and he compared its place in the national psyche to a turkey's prominence at Thanksgiving. Nan-e sangak is eaten daily for breakfast, often with cheese. The bread is cooked over a pebble-based stove-'sang' means stone in Farsi-and comes in three different versions: sadeh, khoskhashi, and zaffaron. Sadeh, meaning simple, is the basic version and currently costs 5000 rials, about 50 cents - double from what it was six months ago. Khoshkhashi includes some spices, was reputed to be the preferred version according to the baker, and costs $1.00. Zaffaron includes saffron and costs about $1.50. Nan-e sangak is one of several traditional flat breads. Others include nan-e barbari, which is popular in Iran's Azeri regions, nan-e toftun, a cheaper bread variety similar to Indian nan, and nan-e lavash, a very thin, simple flat bread. ...Makes its Price a Political Issue ¶4. (C) The price for bread is supposed to be the same throughout Tehran and the IRIG will occasionally conduct price checks to ensure correct pricing; in late August the IRIG announced it was sending 600 officials to check bread prices throughout Tehran. Bread quality and prices are occasionally mentioned in Friday Prayers and often come up in state-run news broadcasts. ¶5. (C) The IRIG regulates the price bread via its flour subsidies. Iranian farmers sell their flour to the government, and the IRIG also imports flour to make up for shortfalls in domestic production. The government then sells its flour at a subsidized rate to bread manufacturers; the subsidized rate is 460 rials/kilogram (about 5 cents/kilogram). The rate available in grocery stores is approximately 3000 rials/kilogram (about 30 cents/kilogram). According to the baker, the IRIG will increase its price for flour quietly, as it did six months ago. The bakers have no choice but to pass the price increase on to its consumers, whereby the government blames the bakers for the price increase and bakers blame the government. ¶6. (C) The price discrepancy between the subsidized and unsubsidized flour fuels a black market for cheap flour. The baker said being caught selling flour purchased from the government at subsidized prices on the black market can yield prison sentences of up to one year. He also said that the IRIG DUBAI 00000361 002.2 OF 002 is trying shut down many of the small, more traditional bread bakers. Although the IRIG publicly asserts the cleanliness of these bakeries does not meet its standards, in reality, the government is concerned that these bakers are selling their excess flour on the black market. Whereas the larger bread factories-such as that owned by our interlocutor-have consistent bread demand and hence production each day, the smaller bakeries' production varies from day to day, giving them fodder for the black market. ¶7. (C) Comment: Iran's bread market shows the distorting effects of subsidies and the corresponding rise in black market activities. Although the Iranian government remains sensitive to the political consequences of rising bread prices, its seeking a solution in law enforcement vice market mechanisms doesn't address the core problem, and the consequent rise in this essential staple is one of the most palpable consequences of Iran's mismanaged economy for the average citizen. End comment. EYRE