Insight: Despite sanctions, Apple gear booms in Iran
DUBAI (Reuters) - At its gleaming store, RadanMac offers the latest Apple gear - the new iPad, iPhones, iPods, laptops, all-in-one desktop computers and more.
But this is no ordinary Apple store. It's in Tehran, where Apple and other U.S. computer products are banned under U.S. sanctions that have been in place for years. Despite the embargo, RadanMac is one of an estimated 100 stores in the Iranian capital that openly sell Apple products, often at little more than U.S. prices.
"Business has been booming for the last three years," said Majid Tavassoli, the store's owner, in a phone interview. He said his company employs more than 20 staffers and has been supplying Apple products to Iranian buyers since 1995. The company also has a servicing unit and a business sales arm whose clients have included the Central Bank of Iran, state television channels, newspapers and design professionals.
Iran's booming Apple business underscores the limitations of economic sanctions by the United States and other countries. Washington and its allies have imposed sanctions in an attempt to curb Iran's nuclear program, which Tehran maintains is peaceful. U.S. companies are barred from selling any goods or services to Iran unless they obtain special authorization.
The focus of the sanctions has been on Iran's banks and oil industry, Iranian individuals and companies that Western capitals believe are assisting what they suspect is Tehran's drive towards a nuclear weapons capability.
But U.S. consumer products and computer equipment are another matter. Although they are banned, enterprising Iranian merchants continue to source them through underground trade routes in the Middle East and beyond.
In the case of Apple, some digital sales of music, videos and software go directly through the California company - via its iTunes and App Store online services. According to Tehran computer dealers, Iran is a rapidly growing market for software downloads: Iranians register Apple accounts with randomly-chosen addresses outside the country, and use foreign gift-cards to pay for purchases.
In response, a spokesman for Apple Inc referred Reuters to its export control policy that restricts it or any subsidiaries it owns from exporting any products to Iran.
Once considered rare and sought-after, iPhones and iPads are now de rigueur in Iran among those who can afford them. The epicenter of the trade is Tehran's largest technology mall, the bustling Capital Computer Complex, where more than 350 traders supply products for Iran's increasingly tech-savvy population.
One of RadanMac's competitors is a smaller firm called Apple Iran. Its website is a nearly exact replica of Apple's own, except for the Persian language and a disclaimer: "This website is not in anyway affiliated with Apple Inc." Apple has been attempting to shut it down, according to a person familiar with the matter.
"We're really proud of it," says Apple Iran spokesman Ali Afghah, an Apple enthusiast and author of a Farsi-language study on the history of the company.
"I'm known as the Apple guy by friends and family," said the 28-year-old, who bought his first Apple computer in 2002 and now describes himself as a "Mac-head."
"It was different then," he said. "The products were around double the price."
Like RadanMac, Apple Iran boasts an impressive cast of corporate customers for its services. Along with major Iranian banks, they have included IRIB - Iran's state broadcasting network - newspapers and magazines, Afghah said.
"There must be at least 1,000 editors in Iran now using Macs, if not more," he estimated.
Neither government officials nor editors responded to requests for comment on whether they used Apple technology.
In recent months, Afghah said, Apple Iran has seen sales decline because of tough new sanctions imposed by the U.S. and its allies against Iran's financial sector. The new measures have caused Iran's currency, the rial, to plummet and made international payments from Iranian banks much more complex.
The company relies on a steady stream of creative individuals - including musicians, film editors and photographers - to keep its business going.
Tavassoli set up RadanMac - in Farsi, the word "radan" means "the one who does everything correctly" - after his employer, a Middle Eastern computer company, pulled out of Iran. He had worked there as a service engineer for Apple products.
Left with the company's spare parts, he said he invested a few thousand dollars and spent the next 15 years combining his love of Apple technology with trying to make a living out of it.
"To start with, it was really tough," said the 51-year-old. "Four of my colleagues gave up and moved back to the States. But I love what I do."
Despite the sanctions, Tavassoli said there was no shortage of business because of Iranians' love for the latest technology. Still, sales come with major headaches and taking big investment risks.
Like many traders, he prefers to order directly from distributors in Hong Kong, Singapore and Malaysia. But the tightening embargoes against Iran's financial system since the beginning of this year now make direct shipments more problematic, especially if they are large.
He can use Dubai or Turkey as an alternative transit point but that incurs additional duties and shipping fees. Iranian customs also needs to be paid: around 4% for portable products and a whopping 60% for larger components, such as desktop iMacs and monitors.
Even so, prices often remain competitive with authorized Apple dealers outside Iran. The lowest spec MacBook Pro was priced in Tehran this month at around $1,250, compared to $1,200 (before tax) for the slightly updated model in New York. This is significantly cheaper than buying the product in many European capitals. The fluctuations in Iran's volatile open market dollar rate mean that prices change every day.
Apple dealers in Iran often manage to obtain the company's newest models within weeks of their release and at reasonable prices. The latest releases also show up sooner via opportunistic travelers who purchase them abroad and resell them at highly inflated prices.
Obtaining spare parts poses particular challenges. RadanMac draws customers by offering a one-year service contract with all sales. "It's Iranian Apple Care," Tavassoli said with a chuckle, alluding to the name of Apple's own technical support and warranty services.
In the absence of a reliable supply of spare parts his team often has to borrow from new computers to fix old ones. "It's one of the most difficult issues we face," he says.
In the meantime, Iranian demand for Apple's own online stores is rising, say Apple traders who report a sharp rise in requests from customers.
Thirty-year-old computer engineer Sina, who didn't want his family name to be published, said he set up an iTunes account for his girlfriend after buying her an iPod.
Computer users in Iran trying to download directly from iTunes eventually will see a "1009 error message," which indicates that the service is blocked to the country from which the connection is being made.
Sina said he circumvented the block on Iranian Internet addresses by using a secure, virtual private network to access the Apple website. Then he downloaded iTunes. He first tried to register an account with a U.S. address he found on the Internet, but encountered problems.
But a Canadian address worked. He also bought online a Canadian gift card to make purchases. "Everything worked fine," he said.
He noted that many young Iranians use gift cards on iTunes to buy games and apps, not music. "In Iran, music is mostly piracy and just copied to iTunes from other sources," he said. Iranian computer sellers agree the practice of outfoxing iTunes is becoming very common in Iran.
Tavassoli says his company now focuses on Farsi-language educational tools it has developed for its clients. He has produced video tutorials, given seminars and produced an app for iPhone users that is available on iTunes. "If you can provide your customers with everything they need, you'll survive," said the entrepreneur, who spent seven years in the United States.
Tavassoli's investment and hard work seem to have paid off. But not being allowed contact with the company he has devoted his career to remains an enduring source of frustration.
"Over the years I've personally installed more than 4,000 Macs here," he said. "Apple would be so damn proud of me and yet it doesn't even know me. That hurts, that really hurts."
(Marcus George reported from Dubai; additional reporting by Steve Stecklow in Washington and London; edited by Mike Williams)
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