Iran Blocks Billions Of People's Money In Car Pre-Sale Scam
The Central Bank of Iran has blocked at least 96 trillion rials ($2 billion) in public's money in a government scheme for car pre-sales, feared as another scam.
The Central Bank of Iran has blocked at least 96 trillion rials ($2 billion) in public's money in a government scheme for car pre-sales, feared as another scam.
The Islamic Republic’s Ministry of Industry, Mine and Trade announced early in March a scheme allowing people to deposit money to book the purchase of an imported car, but the list of cars and their models, the available number of cars, and even their final prices were not provided at the time.
The government promised people refunds if they opted out of buying the cars or if the number of available cars were fewer than the demand but after more than a month of waiting, people are demanding refunds, but the CBI is failing to uphold its side of the deal.
According to a report by Faraz Daily on Wednesday, the total amount of frozen money is 1.5 quadrillion rials ($3.12 billion), but the article only talks about 96 trillion rials of the prospective buyers’ money.
The scheme required those applying to opening an account containing at least five billion rials ($10,000).
The scheme involved several vague conditions such as not owning a car and as things fail to progress, many expect that like other government schemes, it was little more than a scam. In previous years, such schemes have ended with several well-connected people ending up with dozens or even hundreds of cars.
Amid public criticism and frustration over the lack of transparency about the process, the registration window closed after about a week, with over 120,000 people signing up for the plan. Finally, the names of 34,000 people were drawn, which means out of about 600 trillion rials (about $1.2 billion) of the entrants’ frozen money, only a small fraction of around 170 trillion rials ($340 million) was spent on the imported cars.
This plan was not the only scheme that the regime devised to collect people’s personal investments in the last days of the previous Iranian year – which ended on March 20. Over a week after the plan for the imported cars, the ministry announced a similar one for the pre-sale of domestically manufactured cars.
The number of cars was announced as about 500,000 and applicants were asked to block 1,000 billion rials ($2,000) to be considered for the draw. The final number of entries has not been announced but by March 19, more than 360,000 people had already registered, according to the ministry’s spokesman Omid Ghalibaf. During the past two weeks, a large number of people have been complaining on social media that despite their cancellation, the banks would not allow them to withdraw their money.
Deputy industry minister Mehdi Niazi says that the issue is communicated with the relevant banks and the regulatory body of the CBI. “Unfortunately, despite the correspondence and emphasis on the necessity of respecting people’s rights, banks refuse to release the blocked money,” he said, adding that banks blame a lack of action by the CBI to justify their move.
The prices of the cars have officially increased by 30 percent since the registration by the applicants, meaning that the participants are in for a huge loss, in an already dire economic time in Iran. A question that is circulating on social media is who will pocket the interest for the money blocked in the banks.
The Islamic Republic has a notoriously chaotic car market mired with monopolies – for manufacturing vehicles as well imports and exports – and affordability issues. Since the United States introduced ‘maximum pressure’ sanctions in 2018, threatening third parties dealing with the Iranian financial sector, Iran has struggled with imports, while European carmakers in joint projects have withdrawn. Iranian automakers are also quasi-governmental companies, benefitting from favorable borrowing and lack of competition. Some media in Iran have speculated that this vested interest might have a role in blocking approval for imports.
Earlier in April, Iranian Traffic Police said that more than 85,000 car accidents occurred during the Nowruz holidays, with about 900 people killed, one third of those, children. Between 2008 and 2018, 280,000 people died in road accidents, although there are no estimates of how many of these deaths were directly related to mechanical problems with domestic cars.
