Iran Pulse

US sanctions put nearly half a million jobs at risk in Iran’s auto parts industry

Article Summary
Auto parts suppliers in Iran warn that US sanctions coupled with domestic mismanagement are bringing their industry to its knees.

Union leaders who are frustrated with pressure from abroad and at home say some 450,000 workers employed by Iran’s auto parts industry are facing layoffs within a month. In the past few months, the country’s auto industry has witnessed a drop in production. In addition, a large portion of cars remain grounded in production lines while pending completion and then distribution in the market due to a scarcity of vital parts, according to economic daily Jahan-e-Sanat

This has not only created price turbulence in the auto market but has left the parts manufacturers in the red as well. Quoting union officials, Iran’s Labor News Agency said that with giant domestic carmakers failing to pay their debts to local auto parts companies, the latter are now being pushed toward bankruptcy.

The deputy head of the auto suppliers union blamed the central bank and the Finance Ministry for the situation. “The auto parts industry deserves condolences,” said Shapour Samei at a news briefing in Tehran Aug. 13. “The manufacturers are in hard times. In addition to laying off their staff, they have also reduced the working shifts.” According to Samei, currency fluctuations have further prevented stable production, reducing output by 40-50%. In a sarcastic tone, he added that “the central bank and the Finance Ministry had already begun their sanctions on the domestic manufacturers even before the United States started doing so.”

Another member of the union, Maziar Beyglou, warned that production could come to a halt in September. In that case, Beyglou said he would hold government institutions accountable for the looming job losses. Under a scheme to protect domestic production, the government of President Hassan Rouhani has backed several industries by granting them access to hard currency at the official rate of 42,000 rials per dollar. The auto parts makers say they have imported products at that rate, bypassing the much higher open market rate of 10,700 rials per dollar.

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But now, suppliers say the products they have ordered at the lower, official rate are blocked at the customs office, where officials say importers must pay the margin between the official and open market currency rates. Beyglou lamented this strategy as a measure that is “unintentionally in line with US sanctions to pressure [domestic] producers.”

Iranian car prices have been rising nonstop over the past few months. Automakers have been accused of destroying competition in the market via their monopoly and excessive state support. Prices that are also widely seen as unreasonable could now see further jumps, and thus be met with further public fury.

Sanctions on Iran’s auto industry by the United States were imposed Aug. 6. This is not the first time the sector has been targeted by external penalties. In 2013, with his ninth executive order against Iran, US President Barack Obama targeted the industry by signing off on sanctions against anyone who does business with the country’s auto producers.

“The US prioritizes the auto industry over the energy sector in its sanctions regime," the head of the union Morteza Mortazavi said. "That means they are conscious about the significant number of jobs the industry has created for us. The livelihoods of some 7 million Iranians are pinned on the country’s auto parts industry.”

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Al-Monitor Staff

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