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US sanctions threaten Iran’s high hopes for tourism

While the reimposition of US sanctions is likely to damage the revival of Iran’s tourism sector at least in the short term, the country’s ambitious plans to attract foreign visitors should not be written off.

TEHRAN, Iran — Iran's numerous tourist attractions, many of which stem from its rich history and civilization going back thousands of years, have the potential to transform into revenue streams far more sustainable than the country's vast oil and natural gas reserves. But this potential has remained largely untapped due to unyielding restrictions that deprive visitors of a number of basic liberties, Iran’s troubled foreign relations — mostly with the United States — and lackluster development caused by mismanagement.

As such, while Iran's tourism sector has grown, it has done so at a much fainter rate than those of neighboring countries such as Turkey and the United Arab Emirates, which have conversely become magnets for scores of Iranian tourists. In this vein, even as 4.9 million foreign tourists visited Iran in the Iranian year ending March 20, 2017, the country's tourism balance is still heavily in the red since more than 9 million Iranians spent their money abroad during the same period.

Tourism is projected to have a 3% direct share of Iran's economy in 2018, while its indirect and induced impacts will drive up that share to higher than 7%. The sector's contribution to employment is forecast to rise to more than 1.65 million jobs or 6.2% of total employment this year.

But with the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and its pledge to reimpose stringent sanctions on Iran, a long shadow has been cast on the country’s tourism sector.

While the other signatories to the JCPOA have been unanimous in voicing support for keeping the landmark deal alive, this has failed to reassure Iranian businesses.

"We cannot definitively decide on what we're going to do tomorrow," Saeed Azam-Vaghefi, a product and promotion manager at Iran Doostan Tours Co., told Al-Monitor. "We really don't know what can be done."

"We are a business enterprise and a subordinate of the country's political conditions. I'm not sure of the future of my business, and we have predicted no particularly clear scenarios — even as our country is among the safest for the presence of foreign travelers," added Azam-Vaghefi, whose employer was recognized as Iran's best tourism services exporter last year.

Younger Iranians who work in the tourism sector also share these concerns, perhaps even more emphatically as they find themselves working in a highly unstable environment with fewer experiences to draw on.

Nasrin Tahernejad, a millennial tour leader, said the prospect of US sanctions will in general have a negative impact on Iran's image abroad. "Sanctions will make people think that even basic safety and security are scarce in Iran because they will just have a general view that things are bad in the country," she told Al-Monitor.

Tahernejad said her own tour leader friends and peers who have become friends with foreign tourists over time are increasingly being asked questions about how safe Iran is to visit, noting that even returning tourists are expressing grave concerns.

However, not everyone is short on optimism. Hamid Athari, a quinquagenarian who’s been working as an inbound tour guide since the July 2015 signing of the nuclear deal, doesn’t view impending US sanctions as the biggest threat to Iran’s tourism sector.

“These sanctions are unilateral, whereas the previous ones [which were lifted under the JCPOA] were multilateral,” Athari told Al-Monitor. “I think things will remain roughly as they are [for the tourism sector] and any psychological effects will be short-lived.”

Athari opined that Iran’s ongoing currency crisis, which induced the government to unify the dual exchange rate regime on April 10, has a bigger impact — but that this impact will not necessarily be wholly negative.

Since the Central Bank of Iran (CBI) on April 11 capped the amount of foreign currency that travelers are allowed to purchase at the new unified exchange rate — 1,000 euros once a year and 500 euros once a year for distant and neighboring countries, respectively — many have had to rethink their usual holiday travels. Foreign currency beyond these amounts is available at a much higher rate on the black market, though such purchases are technically against the law.

Against this backdrop, the CBI has reportedly reached an agreement with the tourism organization — which is finally set to turn into a tourism ministry as the general outlines of its transformation bill have been approved by parliament — to extend foreign currency to the tourism sector at the official rate.

On the other hand, for foreign visitors, the weakened rial means cheaper travels to a country that was already ranked first in the world in a 2017 World Economic Forum (WEF) report in terms of price competitiveness. Thus, should the government manage to succeed in terms of managing the new exchange rate regime, Iran’s tourism balance might stand to benefit.

But in addition to all major problems that have challenged Iran’s tourism sector for years, including but not limited to lackluster tourist service infrastructure and health and hygiene — the abovementioned WEF report ranked them at 116th and 93rd in the world, respectively — the foreign currency issue has raised the creativity bar for speculative activities.

“Recently, most of the people around me looking to purchase dollars call and say that they want to buy [hard currency] from foreign travelers because money exchanges don’t sell it to us,” Nooshin Hashemi, a 23-year-old inbound travel consultant and tour manager told Al-Monitor in reference to the CBI’s ban on the sale and purchase of banknotes by money exchanges on April 14.

Hashemi said reimposed US sanctions, on the other hand, will most likely translate into lesser prospects of Iran re-establishing direct banking channels with other countries, meaning that inbound tourists will have to continue carrying cash with them. She also said the number of foreign tourists will decrease.

Hashemi noted the negative image of Iran that goes hand in hand with the reimposition of US sanctions, saying that foreign tourists may wonder why Iran is sanctioned, and that the answer to such a question may misguidedly be “because they’re terrorists or because of their nuclear power.”

All in all, the return of US sanctions will not, at least in the short term, be without detrimental effect to Iran’s tourism sector. Nonetheless, it would also be premature to completely write off Iran’s long and ambitious goal of attracting 20 million foreign tourists per year by 2025 and earning as much as $25 billion from tourism just yet, especially as senior officials, including Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani, have emphasized development of the tourism sector.

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