The Rise and Fall of Haft-Tappeh Sugar Factory

Clues to many current events in Iran can be traced back to the 1960s, the first page in Iran’s calendar of industrialization. It’s a calendar that stretches back decades but so much has happened in that time that it seems to go back a thousand years, in many ways a record or diary of dashed hopes. And, when reflecting on it, many an Iranian says with a sigh: “How did we get from there to here?” 

 

Act 1: Dreams of Prosperity

The Haft-Tappeh Sugar project was part of the Khuzestan development plan, an initiative exclusively tied to the name of Abolhassan Ebtehaj, the first president of Iran’s Planning Organization. From the outset, Khuzestan held a special place in his thinking and plans, and he dedicates 16 chapters of his memoirs to the province [Persian link].

“One year after the agreement with [David Eli] Lilienthal was signed [in 1956], a number of other projects were ready, including the Haft-Tappeh Sugarcane Project in Khuzestan,” Ebtehaj wrote. “To study the feasibility of sugarcane cultivation in that area, Lilienthal, one of the foremost experts in the world and a native of Puerto Rico, was brought to Iran. After preliminary studies were done, he was so impressed that he told me that not many places in the world have the capabilities of Khuzestan...Studies on soil were done and eventually experts designated 10,000 hectares in specific areas to cultivate sugarcane — with the proviso that if the land was at their disposal they would plant sugarcane, they would harvest it on a certain date and, in the meantime, they would also build a sugar refinery.”

In 1945, before the birth of Iran’s Planning Organization, and when Ebtehaj was the governor of Iran’s Central Bank, he believed that Iran “must build so many dams in Khuzestan so we can use the last drop of the province’s water for agriculture and generating electricity.” But the British, who occupied Khuzestan and some other parts of Iran during World War II, were against Ebtehaj’s ideas, making his negotiations with them as the governor of the Central Bank fruitless. However, when he once again worked on development in the province in 1954 as part of his role at the Planning Organization, he tried to apply in Khuzestan what the US’ Tennessee Valley Authority (TVA) learned during the Great Depression.

In 1956, Ebtehaj signed a contract to develop Khuzestan with Lilienthal and a US company with expertise in resource development. He also succeeded, with much difficulty, to secure a loan from the World Bank. But his tenure at the Planning Organization was not long enough to see through the construction of the Dez Dam, which was completed in 1963, and other development projects in the province. A short while after he was dismissed from the Planning Organization, Ebtehaj was sent to prison and the projects were never completed the way he had envisioned them.

“Unfortunately, after I left the Planning Organization the projects were abandoned,” he wrote, and added that his wish had been that Khuzestan would be turned into the best agricultural land in Iran. “If the development plan had been carried out correctly, this wish would have come true.”

The Haft-Tappeh refinery came online in 1961, the same year that Ebtehaj was sent to prison. "My crime was wanting to make Khuzestan prosper," he said. 

 

Act 2: Passage of Time

Haft-Tappeh complex is almost 60 years old but, for an industrial project, it seems much, much older. It had a magnificent birth, a highly turbulent childhood, a difficult adolescence, a chaotic middle age, followed by a premature old age.

Haft-Tappeh Sugarcane Agricultural and Industrial Complex opened in 1961. In 1978 it produced a record of more than 100,000 tons of sugar. But the situation changed fast. The long interregnum that started with the 1979 Islamic Revolution and lasted through the 1980-1988 war with Iraq, the chaos in management and, lastly, the transfer of the refinery’s ownership into private hands all led to the eventual decline of the complex throughout the four decades following the revolution.

In 2014, when the Privatization Organization published the transfer of ownership documents [Persian PDF], the refinery’s sugar production had reached 46,000 tons. According to statistics provided by Iranian Sugar Factories Syndicate [Persian link], production reached 60,000 tons in 2016 and 2017.

The pre-revolution Iranian house of representatives and senate approved the charter of the Haft-Tappeh company on December 22, 1975 [Persian link]. According to Article 8 of the charter, the government was to issue shares for 99 percent of the value of the company and offer them for sale on the market while keeping the management in its own hands. But the Shah’s government did not get a chance to implement this article.

The 1979 revolution and subsequent events delayed many projects and plans for years. During the war with Iraq, Haft-Tappeh was bombed multiple times. Even though the war prevented the refinery from operating normally, the development of Khuzestan’s sugar industry remained on the agenda of the Islamic Republic’s novice government. However, the keyword this time around was not “development,” but the revolutionary term “self-sufficiency.”

After the revolution, the management of Haft-Tappeh was entrusted to the Ministry of Industry’s Industrial Development and Renovation Organization of Iran, despite the fact that the Ministry of Agriculture was responsible for setting policies for the development of sugarcane industries in Iran.

In 1984 the Sugar Council was formed, and was supervised by the Ministry of Agriculture. The goal of the council, in the name “self-sufficiency,” was to increase the production of sugar to 1,750 tons. To this end, the council put forward the Sugarcane Agricultural and Industrial Development Plan, which was approved by the government in 1986. The plan had its own line item in the 1988 government budget. In 1990 the plan was incorporated into the country’s First Development Plan and in the same year, the Ministry of Agriculture approved the charter of the Sugarcane and Collateral Industries Development Company [Persian link] as a means of restarting the development and cultivation of sugarcane and its associated industries. The plan was based on the establishment of seven “units” for cultivating and processing sugarcane.

This was an ambitious plan, but costs were involved. Besides demanding a high level of financial resources, the plan’s environmental damage both in Khuzestan and across Iran was considerable. Eighteen years ago, Jasem Shadidzadeh Al-Tamimi, a member of parliament from Ahvaz, warned against the consequences of the plan. And in an interview with IranWire in July 2018, he said that misguided and damaging water management policies in Khuzestan still continue [Persian link]. “There is no water left in Khuzestan to be redirected,” he said.

 

Act 3: Ruin

Haft-Tappeh has gone through a number of serious crises. Neither the events of the 1950s and 1960s in Iran, nor even the revolution and the war with Iraq, threatened the life of Haft-Tappeh. But what happened to the refinery after 2005 was a horrifying and deadly blow.

After producing 108,000 tons of sugar in 2003 and 2004, the production of the refinery suddenly dropped to 18,000 tons in 2009. This was one-third of what it produced in 1986 when the bombardment by Iraq had seriously disrupted the cultivation and the processing of sugarcane in Khuzestan.

 

The chart above clearly shows the unhappy turn of events for Haft-Tappeh after the Iranian calendar year of 1384 (March 21, 2005 to March 20, 2006). It was also the year when the first signs of workers’ protests and unrest began to emerge. Issues around Haft-Tappeh were even raised during the 2009 presidential election debates. 

There were two main causes for the fall of Haft-Tappeh in the mid-2000s:

1. The Sugar Mafia

The tariff on sugar imports that was 150 percent in 2004 suddenly fell to 50 percent in 2006, and to 10 percent in 2007. According to Bahman Danaee, Secretary of the Board of Directors of Iranian Sugar Factories Syndicate [Persian link], in the years from 2007 to 2009, following the reduction in tariffs, Iran imported close to five million tons of sugar — but the country’s total annual consumption is only around two million tons.

It is not known why the tariff on sugar imports was reduced. Comparing statistics from 2001 to 2005 does not reveal any significant change to justify the conclusion that production and economic indices or changes led to such a decision. The only significant change was that the government changed hands, with the election of Mahmoud Ahmadinejad to the presidency. Ahmadinejad had strong support from religious conservatives and the traditional bazaar merchants who would benefit from imports.

2. The Disaster of Privatization

For advocates of privatization, May 22, 2005 was a day to celebrate. On that day, the Supreme Leader Ayatollah Khamenei issued the directive for privatization, which was entitled “General Policies of Article 44 of the Constitution.” Article 44 of the constitution simply states: “The economy of the Islamic Republic of Iran is to consist of three sectors: state, cooperative, and private, and is to be based on systematic and sound planning.” The Supreme Leader claimed that his directive would:

- “Increase the pace of national economic growth.”

- “Expand ownership to the general public in order to provide for social justice.”

- “Enhance efficiency of economic entities and utilize monetary, human, and technological resources.”

- “Increase the share of the private and cooperative sectors in the national economy.”

- “Decrease the financial and managerial responsibilities of the government in managing economic activity.”

- “Increase the public employment rate.”

- “Encourage savings and investment by the public and enhance family income.”

But the bonfire of privatization left behind only a pile of ashes and destruction. A mishmash of corruption, lack of planning, baseless optimism and negligence came to make the words “privatization” and “Article 44” synonymous with bankruptcy instead of prosperity.

Haft-Tappeh was not privatized until 2015, but uncertainty hung over it for 10 years after the 2005 directive was issued. After the refinery became subject to privatization, the management used it as an excuse not to pay its workers. Intermittent strikes by workers followed. After repeated protests, in September 2007 the government paid the workers a portion of their back pay. A month later the workers decided to revive their union, which was originally founded in 1974. In the summer of 2008, more than 2,000 workers gathered and reconstituted the Haft-Tappeh Sugarcane Workers Syndicate.

Eventually, strikes by workers delayed the privatization of the company for a period but, finally, on November 22, 2014, Haft-Tappeh was put on auction for 220 billion tomans, or over $52 million, while it was reported that it had an accumulated debt of more than 350 billion tomans, or over $83 million — even though a statement by the Privatization Organization put the difference between its assets and liabilities at a lower number [Persian PDF].

At last, in January 2015, the company was transferred to private ownership. It was a strange scenario. The buyer was an unknown company headed up by two 30-year-old men, Omid Assadbeygi and Mehrdad Rostami Chegini. Prior to their purchase of Haft-Tappeh, they had very little to point to on their business record. From the very beginning, their youth and their almost non-existent business record led many people to view the deal with suspicion and suspect corruption. It was hard to fathom how the oldest agro-industrial project in Iran had been turned over to a couple of young men with absolutely no experience in the field.

Unlike other instances of privatization, no one was optimistic about the future of Haft-Tappeh from the very beginning, although the new managers tried to calm the situation in the early months by settling some of the workers’ back pay. But soon enough the protests started up again, and gained strength.

The workers demanded that the government nationalize the refinery again. If previously the company had cost the government only money, this time it was costly to the government in political, social and security terms.

Sooner or later the government would have to step in and pay the price. As in similar cases, the back pay of workers would have to be paid from the public coffers but, afterward, what was the government’s plan for dealing with this and other bankrupt enterprises?

A Catchphrase for Many Ills

Today, the Haft-Tappeh crisis has escalated. Widespread protests and workers’ strikes make the top headlines in Iran, signaling an ever-deepening economic, social and political crisis in the country.

Sixty years ago the Haft-Tappeh dream was about prosperity and an eastern version of California. But today, it is a terrifying crisis with no clear end in sight. In the social and economic lexicon of Iran, “Haft-Tappeh” has become a multifaceted term to be used in a range of contexts: Development failure, bankruptcy, corruption, poverty, unemployment, environmental damages — and no doubt more to come.

 

Related Coverage:

Living on the Margins in Iran: The Rise and Fall of Khuzestan, November 2, 2018

Gotvand Dam: An Environmental Disaster, July 16, 2018

“We Are Thirsty, Not Saboteurs”, July 2, 2018

Police Open Fire on Thirsty Crowds, July 1, 2018

Forced to Migrate for a Glass of Drinking Water, June 29, 2018

The Plight of Iran’s Unpaid Workers, April 10, 2018