EghtesadOnline: Iran’s exports to its top five destinations during the first three months of the current Iranian year (March 21-June 21) accounted for 74% of its total exports, according to the head of the Trade Promotion Organization of Iran.
“A total of $7.92 billion worth of commodities were exported to China, Iraq, the UAE, Turkey and Afghanistan in Q1,” Hamid Zadboum was also quoted as saying by IRNA.
The official noted that China with $3.14 billion accounted for 29%, Iraq with $2.34 billion for 22%, the UAE with $1.27 billion for 12%, Turkey with $594 million for 6% and Afghanistan with $569 million for 5% of Iran’s total exports over the period.
India, Thailand, Pakistan, Indonesia and Ghana came sixth to 10th in the list of Iran’s top export destinations respectively.
According to Mehdi Mirashrafi, the head of the Islamic Republic of Iran Customs Administration, Iran’s total exports stood at 30 million tons worth $10.7 billion in the fiscal 2020-21, registering a year-on-year growth of 38% and 69% in weight and value respectively.
Zadboum noted that Iran’s exports to its 15 neighboring countries stood at 18,294 tons worth $5.59 billion in Q1, showing a 44% and 51.5% rise in weight and value respectively year-on-year.
Iraq, Turkey, Afghanistan, Pakistan, Russia, Oman, Azerbaijan, Turkmenistan, Kuwait, Qatar, Kazakhstan, Armenia, the UAE, Bahrain and Saudi Arabia are Iran’s 15 neighboring countries.
“Iran’s import of intermediate, consumer and capital goods accounted for close to 71%, 16.4% and 13% of the value of total imports in Q1 respectively,” he added.
An intermediate good is a product utilized to produce a final good or finished product. These goods are sold between industries for resale or for the production of other goods. Examples include steel, wood, glass, gold and silver.
Consumer goods are purchased for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing, and are what a consumer will see on the store shelf. Clothing, food and jewelry are all examples of consumer goods.
Capital goods are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services to produce consumer goods or goods for other businesses.
Q1 total imports hit 8.4 million tons worth $10.2 billion, registering a 6% decrease in weight but a 34% increase in value compared with last year’s same period.
Main exporters to Iran during the period were the UAE with 2.5 million tons of goods worth $3.2 billion, China with 683,000 tons worth $2.2 billion, Turkey with 888,000 tons worth $1 billion, Germany with 239,000 tons worth $414 million and Switzerland with 472,000 tons worth $384 million.
Noting that Iran registered a $476 million trade surplus in Q1, the IRICA chief said a total of 2.74 million tons of foreign commodities transited through Iran, indicating a 121% growth compared with last year.
“IRICA confiscated 5,300 billion rials [$21.5 million] worth of smuggled goods in the first three months of the current year,” he added.
Fiscal 2020-21 in Review
Iran’s non-oil foreign trade declined from $85 billion in the fiscal 2019-20 ($41.3 billion worth of exports and $43.7 billion of imports) to $73 billion in the fiscal 2020-21 ($34.52 billion of exports and $38.5 billion of imports).
The Central Bank of Iran’s data show that except in the month to Oct. 21 and the one ending Nov. 20, Iran’s trade balance was negative every month last year.
The two aforementioned months saw a trade surplus of $1.42 billion and $0.12 billion respectively.
The highest export value was registered in the month to Oct. 21 with $4.67 billion weighing 19.26 million tons as the month to March 20 registered the highest import value with $4.57 billion weighing 2.92 million tons.
The lowest export and import values were registered in the month to April 19 with $1.65 billion weighing 5.35 million tons, and $1.93 billion weighing 2.53 million tons respectively.
According to the Trade Promotion Organization of Iran, there were four main reasons behind the decline in Iran’s foreign trade in the fiscal 2020-21 compared with the years from fiscal 2011-12 to 2013-14.
The main reason behind the decrease was the decline in oil revenues. Parts of raw material costs are supplied from oil revenues. The decline in revenues caused problems in the way of foreign exchange earnings and buying raw materials for export products. Therefore, it caused a decline in the volume of exports during the period.
Currency shock is another reason behind the decline. One of the main variables affected by currency shocks is non-oil export. Iran’s currency market faced an unpredicted shock in the fiscal 2020-21 due to the intensification of US sanctions, the decrease in foreign exchange reserves and the Covid-19 pandemic.
Alongside these problems, the Central Bank of Iran’s forex earnings law made some exporters unable to meet the CBI requirements, so they stopped exporting their products and waited for stability in the currency market and forex laws.
The US imposed sanctions on petrochemical industries and 39 related institutions, and the US Department of Treasury banned transactions, purchases, credit and insurance services to Iran by other countries.
Oil prices also impact petrochemical exports and due to low oil prices in the fiscal 2020-21 alongside US sanctions, petrochemical products registered a decline during the period under review.
Coronavirus pandemic was another reason behind the significant decline in trade. Closure of borders, new standards for foreign trade and the wariness of other countries for importing Iranian products, especially agricultural and food products, caused Iran’s foreign trade to fall.
Iran and the US are holding indirect negotiations on a return to compliance with the 2015 Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action. Representatives of Britain, China, France, Germany, Russia and European Union shuttle between US and Iranian delegations.
JCPOA had limited the scope of Iran's nuclear program. In return, the Islamic Republic received relief from US and international sanctions. However, Washington walked out of the deal under the administration of former president, Donald Trump.
With the possible agreement between the two countries and lifting of sanctions, some of these obstacles such as US sanctions may be removed and there is an opportunity for Iran to develop and increase its foreign trade.