The Grand Bazaar remains the beating heart of Tehran — a city of 15 million people. But Iranians have been worn down by years of economic isolation, due to sanctions that have been tightened like a noose over the past four years.
Investors get very excited about what is considered the last major frontier market poised to open up. It’s described as the “Germany of the Middle East” due to the country’s manufacturing prowess.
But Iranians are about to emerge from an extremely painful period, where average incomes have dropped more than $2,000 since 2011.
As a result, Iran is punching well below its potential, with a GDP of $406 billion at the end of 2014. It is similar in population size to Turkey at 78 million, but with less than half the total economic output.
The Grand Bazaar is a place where trade has been conducted the same way for centuries. All the way in the back, I find a large cluster of carpet sellers, displaying their works, big and small in a bounty of coloured silk and wool.
The so-called bazaaris are a powerful force, known in the past to be politically conservative and resistant to change. That has clearly changed.
Tucked upstairs on the second floor, I find Omid Omidvar, co-owner of Pars Carpets, a specialist in nomadic designs.
While he proudly rolls out his offering, Omid looks forward with anticipation about the day expats return and Iran is no longer shut out of the global banking system.
“In some parts it’s been very difficult, especially for transferring the money because we had so many tourists here, but they did not have the money to spend,” Omid tells me in his confined shop of just a dozen square meters.
Iranians are survivors, having worked around sanctions to keep their doors open. The Iranian rial has stabilised, but at the height of sanctions in 2012, it was down 80 per cent, while inflation soared to 45 per cent.
Through Tehran’s grinding congestion, the production team and I drove to an oasis of calm, a renovated cafe at the fabled Masodouieh Palace. I found two friends, both working in Iran’s industrial sector, who politely disagreed on what lies ahead for this resource-rich country.
One, Mohammad, wants to leave and sees no hope for the future and the other Alireza said he waits with great anticipation for the country to realise its full potential. Alireza points to his friend and said his plan is “the wrong decision at the wrong time”.
Iran, he tells me, with the largest combined oil and gas reserves in the world is about to take off.
Next door to the cafe, designer Anahita Ostadi makes jewellery featuring palace motifs, her way of offering a taste of Persia to visitors. She shares tales of a difficult bureaucracy, high taxes and being hamstrung by banking restrictions.
“I hope in the future we have a country that is open to everyone, especially the US and the others,” Anahita told me in one of her two stores.
Today’s isolation has Iran’s younger generation — 60 per cent of which is below 30 — at odds with the country’s hardliners.
The week we were in Tehran, Iran’s Supreme Leader Ayatollah Seyyed Ali Khamenei, said he wanted to “seriously avoid importing consumer goods from the United States”.
KFC Halal based out of Turkey, was closed down after just one day for reportedly not having the correct food license. Its opening day was one of the top trending topics on social media platforms, illustrating how much excitement there is for imported products.
Business is preparing to cater to that future demand. The Kourash Complex is the first ultra modern mall in Tehran and opened 15 months ago with over 500 stores. The young executive manager of the complex, Amir Rizai, tells me over coffee that he believes they are just two to five years away from what he called “Iran’s Golden Times”.
Despite the crowds — some 40,000 who flood in during a weekend day — uncertainty continues to grip the Iranian consumer. But if all the political and economic forces come into alignment, the Institute of International Finance estimates that Iran could expand nearly 6 per cent in 2016 and an even stronger 6.7 per cent the following year.
Ali Rezaei is owner of “Ave est” one of the first men’s retailers to open up in the complex. He showed me his Italian styled offering with Turkish fabrics as an illustration of how tastes are modernising in his country.
I asked him if his customers are yearning for US products and the reply was blunt: “In my opinion, yes they want US products,” despite his efforts to also offer Iranian made accessories.
That is the real-time challenge for the government of President Hassan Rouhani who is trying to navigate change. Iran is on the cusp of ending years of economic isolation; a younger generation is yearning to open up, but the hardliners are pushing back, unwilling to give up the way they have done business for decades.
The writer is CNN’s Emerging Markets Editor.
