Page last updated at 15:55 GMT, Monday, 13 October 2008 16:55 UK

Rare strike alarms Iran's leaders

Shuttered shop in Tehran's bazaar on 12/10/08
Shops in Iran's bazaars have been shut because of the strike

By Jon Leyne
BBC News, Tehran

The government of President Mahmoud Ahmadinejad has been unnerved by something it is not used to confronting - a strike.

Traders in the Grand Bazaar in Tehran, and bazaars in other major Iranian cities, have been protesting over a new 3% sales tax or value added tax (VAT).

Free trade unions were banned in the early days of the Islamic Republic, so strikes are rare - though news of them occasionally surfaces, usually in some dispute over unpaid wages.

But this protest is coming not from industrial workers, but from one of the most powerful groups in Iranian society.

The market traders, or bazaaris, are credited with playing a key role in the Islamic revolution in 1979. So little wonder President Ahmadinejad is nervous at losing their support.

The strikes began last week in the provincial cities of Isfahan, Tabriz and Mashad.

Led by the dealers in gold and jewellery, gradually they gathered momentum, and spread to carpet and textile dealers.

Three thousand of them are reported to have marched on the governor's office in Isfahan. Some are even reported to have attacked a branch of the government-owned Bank Saderat.

It was when the strikes took hold in Tehran that the government quickly took notice. Imposition of the 3% tax was suspended. The confrontation seemed to be over.

Police patrols

But on Monday some traders continued to protest - certainly in Tehran, though the situation in other cities is unclear.

Mahmoud Ahmadinejad
President Ahmadinejad already faces blame for a worsening economy

Some stores in the Grand Bazaar were shuttered. Other jewellery traders said they had been persuaded to go back to work by the police, and their own professional association.

So instead they removed their stock from the windows, and covered the displays with cloth. Quite whether they were still open for business was unclear.

They are demanding the government completely scraps the tax, rather than just suspends it.

Large numbers of police are now patrolling the bazaar. Journalists have been turned away. Camera crews caught filming have been ordered to hand over their tapes.

The reaction underlines the depths of government unease at a protest that you could easily walk past without noticing.

For the bazaaris, it is not just the new tax. They have a reputation in Iran, rightly or wrongly, for hardly paying any tax at all. It is reported that the government is trying to tighten up on this. The new head of the central bank has also been calling in overdue loans.

It is not clear how much support the wealthier bazaaris command amongst ordinary Iranians. But their concerns over the state of the economy will definitely be shared.

Inflation is at least 25% and rising, unemployment is a huge problem, and there are signs that the country is slipping into recession.

All this comes before the effect of the recent dramatic fall in the oil price works its way through.

Nobody is suggesting these protests are threatening the regime, but they do highlight the challenge President Ahmadinejad will face as he runs for re-election next summer, blamed by many Iranians for the steadily worsening state of the economy.

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