Iran carpet traders hope quality will trump rivals

By Fredrik Dahl and Zahra Hosseinian

TEHRAN (Reuters) - Standing next to piles of exquisitely hand-woven Persian carpets, Hossein Ghaseminia is confident his rugs, which cost up to $50,000, can see off cheaper Asian rivals and ride out threatened U.S. sanctions.

One of Iran's best-known exports, Persian carpets made from silk, wool and cotton are traditionally by women in villages, who use natural dyes derived from plants to color them in rich hues where red, brown and cream dominate.

"If we produce high-quality carpets people will continue to buy them," said Ghaseminia, who has been more than four decades in the business which is one of Iran's main export earners besides oil.

Selling outside Iran mainly to the United States and Germany, the Persian carpet is also deeply ingrained in the country's national identity. Rugs adorn the floors of most homes and with prices for finer examples reaching many thousands of dollars, they are, for some people, an investment.

But a half-empty hall at the annual Persian Carpet Grand Exhibition last month showed the business facing tough challenges, both at home and abroad.

Drinking tea and talking shop in the midst of thousands of carpets from different parts of Iran, dealers in various types of rugs accused low-cost producers from India, Pakistan and China of copying elaborate Iranian designs.

While Iran remains ahead at the most expensive end of the market, its overall position in the $10 billion global industry -- which also includes machine-made carpets -- has slipped five places to number eight since 2001, with Belgium on top.

Trader Ata Erad said sales were better last year, but insisted there was no crisis.

"The carpet is part of life, as necessary as air and water," Erad said, displaying both old and new wares.

"Carpets are like gold in Iran," he added, proudly showing a 50-year-old specimen from the northwest, measuring 24 sq meters, which he said had trebled in value to nearly $70,000 in a year.

But other dealers said raw material and wage costs had risen sharply, forcing them to hike prices: that has deterred some buyers.

"Business is not good," Ali Mohammad Zadeh said in the stand of his family firm laden with rugs with traditional motifs including different flowers and vines, animals including birds and deer, and geometrical patterns.

Unlike previous years, wealthy buyers from Iran's Arab neighbors and elsewhere had not shown up, he said: "We have not even made enough money to pay for the rent. It would have been better to stay in the bazaar."

U.S. SANCTIONS THREAT

Potentially making matters worse is a threat of renewed U.S. sanctions, which would directly affect a big market.