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Sanctions pull rug from under Persian carpet trade

HAMBURG, April 24 (Reuters) - Business could not get much worse for the Persian carpet dealers who over the past half-century have turned Hamburg's historic red-brick warehouses into an unlikely centre of the global oriental rug trade.

U.S.sanctions forbidding the import of Iranian-made carpets into the United States, even from third countries, have deprived the rug sellers of one of their largest markets at a time when sales are already depressed. New sanctions on payments to and from Iran have only made life harder.

Exquisite hand-knotted carpets with intricate patterns that traders once hoped to sell to hotel chains, embassies or mansion-owners, are now stacked high in dimly-lit storerooms where the smell of wool hangs heavy in the air, their magnificent colours hidden from view.

"You will find more carpets here in Hamburg than in all the bazaars of Tehran," said Monireh Nobari, whose father left the Iranian capital in 1954 to set up the carpet business in Germany she now co-runs with her brother.

"A few decades ago there were 300 carpet traders here importing from Iran. Now there are just 45. We've lived through crises in the past, but we don't see how things can continue."

Her firm does little more than buy to order now that sanctions have been tightened by Western countries that say Iran is developing the capability to make atomic weapons. Tehran says its nuclear programme is purely peaceful.

A few yards from Nobari's carpet business is that of Mir Sadegh Heydarinami, originally from Tabriz. He says the last few months are the worst he has ever experienced.

The mood is the same elsewhere in the long alleys of turreted warehouses in this North Sea port where Iranian names on the door bells provide the only clue of what lies inside.

U.S. TIGHTENS SANCTIONS

The rise of cheap competition from China has taken its toll on the Hamburg-based rug trade, as has the modern taste for simple floor coverings from Ikea in place of handcrafted pieces from Isfahan.

Washington has banned Persian carpets as part of sanctions against Iran in the past, but a goodwill gesture by the Clinton Administration in 2000 allowed imports of Iranian rugs, pistachios, caviar, and dried fruit.

The rug loophole was closed in September 2010 in a move carpet dealers say hurt rural women in poor communities who knot carpets, not the Iranian government.

The carpet trade is an important pillar of Iran's economy. Carpets rank just behind hydrocarbons and their derivatives, and pistachio nuts, as Iran's biggest exports.

Tehran exported around $600 million worth of carpets in the calendar year from March 2011 and aims to export up to $1 billion in the year starting March 2012, largely by increasing sales to China and the United Arab Emirates, Iran's Mehr news agency reported.

Before the embargo hit, the United States imported around $41 million of Persian carpets, according to the U.S. oriental rug importers' association.

For the Hamburg dealers the embargo is a heavy blow. The United States accounted for around 15 percent of exports. They survived embargoes before 2000 largely because then, unlike now, trade elsewhere remained strong.

Hamburg developed as a carpet centre after World War Two, when its free port regulations allowed businesses to store goods without paying import duty. Germany's post-war boom saw Persian carpets became an exotic must-have for the affluent, attracting scores of carpet dealers from Iran.

They and their families form the backbone of what they say is Europe's second largest Iranian diaspora after London.

Members of the community in Hamburg overwhelmingly oppose the politics of President Mahmoud Ahmadinejad.

PISTACHIOS AND SHEEP INTESTINES

Last month Belgium-based SWIFT, the world's biggest electronic payment system, decided to expel all Iranian banks blacklisted by the European Union.

This has crippled legal trade in goods such as rose water, pistachios and Iranian sheep intestines, which make a particularly good casing for Germans' beloved 'Bratwurst' sausages, as companies can no longer receive or make payments.

Mohammad Reza Nobari, Monireh's brother, says this also makes it almost impossible to send special dyes to Iran to be used in carpet production, because producers can't pay.

The Hamburg-based German-Iran Chamber of Commerce said the sanctions imposed by the United Nations, the United States and European Union against Tehran were illogical and ill-conceived.

"There seems to be very little co-ordination or strategy behind the sanctions. We are also seeing that EU sanctions are interpreted slightly differently in each member state," said Michael Tockuss, business manager of the chamber.

The SWIFT ban has left German companies unable to claim payment for almost 1.5 billion euros worth of legal business from Iran, he said.

The EU is banning Iranian oil imports from July 1, which will affect Greece, Italy and Spain, all big importers of Iranian crude last year.

Germany does not buy significant amounts of Iranian oil, but carpets, rose oil, pistachios and intestines all contributed to Iranian imports of 769 million euros in 2011, down 16 percent from the year before due to difficulties linked to sanctions.

Hamburg's Iranian community is closely following a renewed round of talks between Iran and the world's major powers, including Germany, anxious for any sign ties might improve.

"Things are getting worse and worse every day," said Mohammad Reza Nobari. "The sanctions are hitting the wrong people." (Editing by Gareth Jones and Peter Graff)

By Alexandra Hudson

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