INVESTMENTS: Rugs to Riches
Oct 29, 1998


Rugs to Riches:
Easing of trade ban would send carpet sales flying

By Salil Tripathi in Singapore
913 Words
In a tiny shophouse in the trendy Singapore neighbourhood of Holland
Village, Peter Hedger is excited about events thousands of miles away:
American wrestlers are playing an exhibition bout with Iranians. "That
is very good, very good for my business," Hedger says.

In fact, any contact between the two countries is a plus. Hedger
sells carpets from Central Asia, and the United States is the biggest
market in the world for such carpets: In 1997, Americans imported $1.4
billion worth, according to the Oriental Rug Retailers' Association. The
trouble is, none of them were legally imported from Iran, which has been
subject to a U.S. trade embargo for the last 20 years. That means the
market for the precious floor coverings is sluggish and prices are at
rock bottom.

  Hedger's passion is Persian, or Iranian, carpets with their lush
colours and silken smoothness. His treasure-trove of a shop is stacked
with them, giving it a quaint, Middle Eastern charm in a quiet lane
otherwise known for Mexican restaurants and ice-cream parlours. But will
the prices, long held down by the U.S. ban, eventually fly like the
magic carpets in the myths?

  They could, if Iran and the U.S. patch up. And that is no longer the
stuff of stories. Geopolitical realities are bringing the West and Iran
closer. The advance of the Taliban, a radical Sunni Muslim movement, in
Afghanistan has made Central Asia combustible again. And Iran finds
common cause with the West in containing the Taliban. This shared enemy
has prompted some Middle East experts at U.S. think-tanks to recommend
that Congress engage Iran by softening the embargo.

  In addition, in September, Iran took a step to improve its ties with
the European Union. It promised that its government wouldn't do anything
that encourages the implementation of the religious death threat against
the Indian-born British writer Salman Rushdie, whose 1988 novel The
Satanic Verses enraged the Muslim world.

  If Iran can export its carpets again to the U.S., the market will
boom. Before the embargo, America used to buy 75% of the Iranian carpet
supply but, since that market has disappeared, there is a glut in other
countries. "We are close to the bottom of the market," says Lee Lung
Nien, a vice-president at Citibank in Singapore and a carpet aficionado.
"I am very bullish about the future."

  A good quality four-foot by seven-foot Iranian carpet would have
fetched $10,000 in 1979; today it goes for $2,500. But if the embargo is
lifted, the prices will double, say retailers.

  The reason is simple: Carpet making is a craft, and weaving an
intricate carpet takes time. Master weavers from houses like Habibiyan
and Sarafiyan can take up to two years working on a single carpet. Once
Americans start buying, the demand for the stock of carpets at
warehouses worldwide will rise, leading to a dramatic spurt in prices.
As Bruce Granger, an auctioneer in Australia, says: "If the Americans
relax their embargo, the prices can go up by as much as 25% overnight."
(At present, Americans can legally take the carpets back to the U.S. as
household goods only if they can prove that the carpets were bought
before May 7, 1995.)

  But investment should be only one of the reasons to buy a carpet,
Hedger says. "When you buy a carpet you are buying a part of history, a
piece of culture. It is not a dollar-and-cents thing," he says. Ironically,
expatriate Americans are the most aggressive buyers at his
Singapore auctions. At a recent Sunday sale, one seven-foot by 10-foot
Shishla Nain carpet, from the house of Habibiyan, was auctioned for
$4,555; in its heyday it would have fetched $10,000. That does make it
an attractive buy, but as with many works of art, opinions vary about
the worth of a carpet.

  "What you really love about a carpet is entirely a matter of
individual taste," says Linda Chang, an American who has bought six
carpets since she moved to Asia six years ago. "It is difficult to tell
why you like one particular piece over another. It is like painting or
sculpture. Price is not the main concern."

  Lee is attracted by tradition and history. Carpet weaving emerged as
a craft in Iran during Alexander the Great's conquest of Asia. While
different cultures clashed, often violently, the intermingling that
followed led to the flowering of art in Central Asia, particularly
carpet design.

  As Chang points out, choosing carpets is a matter of individual
taste, but there are some ground rules: Clear patterns are better than
intricate designs. If the carpet has medallions, they should be at the
centre. The age of a carpet is important, but all old carpets aren't
necessarily of great value. Carpets made in cities have more knots per
square inch than tribal carpets. But tribal carpets have their own charm
because of their rustic quality and slight asymmetry, and many
carpet-lovers like such quirks.

  Lee says three key factors ultimately determine a carpet's worth.
Does it adhere to its region's weaving tradition? Is it executed
artistically? And would you be pleased to see it at home day after day?
Lee recommends new buyers visit many shops, attend several auctions, and
read authoritative books like Oriental Carpet Design by P.R.J. Ford
(Thames & Hudson, 1994) before making a purchase. "Buy a carpet the way
you would buy a car," he says. "Feel it, test it, try it. Take it home
and see if you like it."