There’s a long line of customers, squeezed together in a large group outside the shop, all of them with their ID cards in hand. Their eyes are fixed on the glass door of the shop.
These are not people waiting to buy bread or meat or to collect government discount coupons, or to buy anything else considered to be an everyday necessity. They are waiting to buy the iPhone X and the iPhone 8. The demand is huge because the phones are being offered at the official currency rate of 4,200 tomans for one US dollar, not the free market price, which is currently double the amount.
Iranians have been posting and sharing videos of these lines on social media, and many of them have expressed surprise that despite uncertain economic prospects and unrest around the country, people are willing to stand in crowded lines for hours to hand over 7.1 million tomans, or around $1,690 at the official price, so that they can buy an iPhone X.
I spoke with Hossein, who repairs smartphones and computers. Over the last few days, he has had to push through crowds outside many of the shops where he works. “Some of these stores are selling stuff at the official exchange rate and people were in lines as long as the eye could see,” he said. “The shops have one week to answer to the Tazirat [a judiciary-affiliated organization that monitors trading crimes and violations],” he added with a laugh. “They must report how much they have bought with the currency at the government’s price and how much they have sold. They will do whatever they can in the one week they have left.”
Hossein is referring to a one-week deadline set by the Organization for the Protection of Consumers and Producers, an affiliate of Iran’s ministry of commerce, for those who have imported merchandise with currency sold to them at the official price. The Iranian Central Bank holds a list of these businesses, which have until July 8 to report at what price they have sold their imports to consumers.
Pocketing the Difference
Since the price of the US dollar climbed sharply in the open market, the price of smartphones has also shot up. Since the prices increased, the communications ministry has published a list of smartphone importers over the last three months. Many of them had received dollars from the government at the price of 4,200 dollars per toman, but have sold the phones at the price of the dollar in the open market, pocketing the difference.
Recently, the minister of communications published news of the first legal action taken against one of these importers. “The Tazirat Organization has carried out its first inspection of a mobile phone importer,” tweeted Mahmoud Vaezi. “According to the report that we have received, this company imported around 20,000 iPhones and sold 15,000 of them to another company in a single deal, charging two million tomans extra [for each phone]. It has 5,000 left in its storehouse.”
Mohammad Emami Amin, Tehran’s Deputy Governor for Economic Coordination, had his own warnings for the lawbreakers. “Individuals and companies who have received currency at 4,200 tomans [per dollar] but have not imported anything, or have sold the currency in the open market, or are hoarding the imports and selling them at open market prices, must expect decisive legal action,” he said. “They should know that not only must they return [the money] to the government coffers, they also have to pay several times more in fines.”
In a conversation with IranWire, Mohammad Ali Asafnani, Director General of Tehran’s Tazirat Organization, explained how the offenders would be punished. “If a company or a shop sells merchandise [at an inflated] price, the Tazirat Organization can fine them an amount of two to five times the actual price of the mobile phone and, depending on the price charged, they must reimburse the customer as well.”
Tricks to Escape Fines
“Fearing that they have to pay two to five times in fines, the companies who had received currency from the government did a lot of things [ to escape the fines],” Hossein told me. According to him, some stores announced that they would sell only one phone per customer, and anyone buying them had to present their national ID cards. “Some of them only sold five or six phones and then told the others to come back the next day,” Hossein said. “At this price, they prefer to sell the iPhone X to their associates or not sell them at all but instead use the IDs of their associates to fabricate sales documents.”
Some shops set other conditions. “Early in the morning, a salesman would go outside the shop to talk to the people in line,” Hossein said. “[They would say], for instance, ‘we will not sell to colleagues,’ or ‘we need copies of the national ID cards of the buyers,’ or ‘a person can only buy one phone,’ or ‘buyers must open the boxes inside the shop and set the phones up right there.’ They wanted to prevent those who were buying the phones at this price from reselling them on the open market.”
But Hossein says he had come across families in line who wanted to resell their iPhones after buying them. “Five members of the same family were in line, clutching their national ID cards,” he told me. “‘They say you have to take them out of their boxes. You cannot sell them after that,’ I told them. ‘Why can’t we sell them?’ the father said. ‘Put them on sale on the website Divar [similar to eBay] for 500 tomans less than the open market and they will sell easily. They won’t sell them at government currency prices forever. If we buy them now at government currency prices and sell them a few days later at a price lower than the open market, we will make a hefty profit.”
Two Invoices, One iPhone
I asked Hossein: If the government currency price is 4,200 tomans and the price of an iPhone X is $1,000, then why are some shops selling it for $700 more? “Well, they are also adding on the costs of transportation, storage and VAT — and their own profit,” he said. He says importers are coming up with new ways to escape Tazirat Organization fines every day. “I hear that many shops charge the price of the phone in two parts,” he said. “They tell the customer to swipe their card twice and then they make two separate invoices — one for the Tazirat and the other for the customer,” meaning that they charge a higher price but hide this from the oversight agency.
Fars News Agency published a report that backs up Hossein’s story about this trick. “Those who yesterday claimed they were selling the phones for the price of 4200-toman dollars are no longer doing so,” the article reports. “But they are still selling it at that price to the people they know...[For others] they sell it by swiping the card twice.” The Fars Agency report reiterated that the card was swiped once for the official currency price and the second time for the difference between that price and the price of the US dollar in the open market.
According to Hossein, one shop, Smart Golden Apple at Charsou mall, sells iPhone X and iPhone 8 set at the government currency prices. I called the store. “We have no iPhone X or iPhone 8,” the salesman who answered the phone told me, “but if you want earlier models, we are at your service.”
More on the hard currency upheaval in Iran:
The Case of the Lost Euros in Aladdin Bazaar, July 3, 2018
Iran’s Currency in Turmoil — Again, June 25, 2018
Expert Warns “Iran’s Economy is in a Death Spiral”, April 26, 2018
Currency Plummets as Corruption and Incompetence Continues, April 18, 2018
Economic Uncertainty as Iranians Celebrate Norooz, March 20, 2018