Iranians launch boycott of Saudi businesses

Following Saudi Arabia’s move to cut diplomatic and commercial ties with Iran, some Iranians have joined forces to launch a campaign against Saudi firms in the country — but is the boycott having any impact?

al-monitor Iranian worshippers chant anti-Saudi and anti-US slogans during Friday prayers in Tehran, Jan. 8, 2016.  Photo by REUTERS/Raheb Homavandi.

Topics covered

trade, saudi-iranian rivalry, nimr al-nimr, hajj, embassy, business, boycott

Jan 28, 2016

In Iran, a campaign to boycott Saudi products was initiated more than three weeks ago. The campaign, which was launched following a similar initiative in neighboring Iraq, was quickly joined by prominent Iranian actors such as Rambod Javan.

Javan posted the message “Never threaten an Iranian” on the messaging app Telegram. The phrase was famously uttered by Iranian Foreign Minister Mohammad Javad Zarif to European Union foreign policy chief Federica Mogherini at a tense moment during the nuclear negotiations in Austria last summer.

The boycott campaign follows Saudi Arabia’s Jan. 3 decision to cut diplomatic and commercial ties with Iran. The rupture was triggered by the attacks on Saudi diplomatic facilities in Iran after Riyadh executed Shiite cleric Nimr al-Nimr Jan. 2.

Mehrdad Mahdavi, a student at Tehran University and one of the organizers of the boycott, told Al-Monitor, “This is a student movement that has nothing to do with the government. We are different from the extremists who attacked the Saudi Embassy. Such actions are not civil. We are in favor of civil behavior and peaceful protests.”

Expanding on how the campaign operates, Mahdavi said, “We used the experience of another campaign launched against the purchase of [domestically produced, substandard] vehicles, which was also a civic movement. We distributed our message through large groups on Telegram. Some of these Telegram groups have more than 200,000 followers and we estimate that we have reached an audience of close to 2 million people through our advertising. Telegram has a huge influence in Iran.”

Reports show that trade between Iran and Saudi Arabia has been very limited, with most of it being Iranian exports. According to Ebrahim Jamili, former secretary-general of the Tehran Chamber of Commerce, Industries and Mines’ Iran-Saudi Council, bilateral trade has been declining over the past decade. Indeed, it stood at a mere $215.1 million in the nine months that ended Dec. 21. Iran’s exports to Saudi Arabia include goods such as marble stones, ceramics, cement, engine parts, faucets, tar, carpets and handicrafts. Meanwhile, its imports from Saudi Arabia have included items such as fabric, corn oil, agricultural machinery, aluminum soft drink cans and motor vehicles.

The semi-official Mehr News Agency recently reported on the boycott campaign, pointing out prominent Saudi firms that operate in Iran. These include food producer Savola Group, which has teamed up with Iran’s Behshahr Industrial Development Corp.; Rani soft drink maker Aujan, an affiliate of Coca-Cola Co.; and the fast-food chain Al-Baik.

Savola has said it will not leave Iran, despite the cut in relations with Saudi Arabia, while its main shareholder, Saudi billionaire Prince Al-Waleed bin Talal, has stated that he will no longer invest in Iran. The Iranian market accounts for 13% of Savola’s total revenues. The Saudi food producer owns 90% of Savola Behshahr Co., which in turn holds a 40% share of Iran’s edible oil market. Following the cut in Iranian-Saudi relations, Reuters reported a drop of 11.5% in Savola’s shares.

So far, the impact of the boycott is unclear. Kian, a graphic artist who is also a member of the campaign, told Al-Monitor, “These [Saudi] companies can never say that, for instance, 'Our sales have dropped and we are paying for the loss.' This campaign has also only been going on for three weeks, and it is too soon to reach a conclusion [about its success] or say anything. Fortunately, given the media coverage, the public has welcomed it.”

Meanwhile, Behshahr’s shares have actually risen on the Tehran Stock Exchange. Sadegh Afzali, a licensed stock broker in the Iranian capital, told Al-Monitor, “During these past few weeks, we haven’t witnessed any significant impact on Behshahr’s shares. If such a boycott campaign is to have an impact, we have to be patient and monitor its effects in the next month or two.”

Expanding on the value of Saudi investments in Iran, Afzali said, “Companies like Rani or Savola will be quickly replaced by rival Iranian producers. In the past, whenever a rumor about a company began circulating, we saw the value of its shares drop considerably. As for Rani, it has many domestic rivals, and considering the cut in [commercial] ties [with Saudi Arabia], and these popular boycott campaigns — if they remain serious — will quickly be replaced and forgotten by consumers.”

Meanwhile, an Al-Baik employee who spoke to Al-Monitor on condition of anonymity said one of the fast-food company's restaurants in Tehran's Sadeghiyeh district was shut down in the past two weeks due to low sales. “Previously, Al-Baik had 15 restaurants in Iran, and now the number of active branches has dropped to 10."

There are three remaining restaurants in Tehran. The employee said sales at the location where he works "are good for now and we have not experienced a drop," though he declined to divulge sales figures. "The branches that faced a decrease in sales were quickly shut down.” 

When contacted by Al-Monitor, an Al-Baik restaurant in the Arikeh Iranian shopping mall in west Tehran refused to discuss the anti-Saudi boycott campaign on the record. However, one of the employees told Al-Monitor on condition of anonymity, ”Our sales have not dropped in the past weeks. Also, we have heard no news about the departure of these fast-food restaurants from Iran and will continue our operations.”

The cut in Iranian-Saudi relations and the boycott campaign also appear to have affected travel. According to Iranian media, flights have been halted between Dhahran, in Saudi Arabia’s Shiite-majority Eastern Province, and the holy Iranian city of Mashhad, which attracts Shiites from around the world.

The anti-Saudi campaign also is seeking to discourage travel to countries they claim support the Islamic State during the Persian New Year holiday, which begins March 20. Kian, the boycott campaign member, told Al-Monitor, ”We think that in a situation where Iran is grappling with economic problems, instead of paying the heavy costs of going to the hajj pilgrimage that money can be spent on helping those in need.”

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