EghtesadOnline: Iran’s foreign non-oil trade reached 98.7 million tons worth $54.8 billion during the current fiscal year’s first seven months (March 21-Oct. 22) to register an increase of 16.5% in weight and 43% in value compared with the corresponding period of last year.
According to Mehdi Mirashrafi, the head of the Islamic Republic of Iran Customs Administration, exports stood at 75.2 million tons worth $27.1 billion, which shows year-on-year growth rates of 15% and 47% in weight and value respectively.
“Iran’s imports hit 23.5 million tons worth $27.7 billion, registering an increase of 21% in weight and 38% in value compared with last year’s same period. Essential goods, machinery, industrial parts, raw materials and intermediate goods accounted for the lion’s share of imports,” he was quoted as saying by the news portal of IRICA.
Also known as necessity goods, essential goods are products consumers will buy, regardless of changes in income levels.
The main export destinations included China (16.9 million tons of goods worth $7.7 billion), Iraq (19.7 million tons worth $5.5 billion), Turkey (11 million tons worth $3.4 billion), the UAE (6.6 million tons worth $2.6 billion) and Afghanistan (2.8 million tons worth $1.1 billion.)
Top exports mainly included natural gas, methanol, polyethylene, semi-finished steel products, liquefied polyethylene, steel ingots, rebar, urea, copper cathode and bitumen.
“Essential goods accounted for 16.6 million tons worth $11 billion of total imports, which indicate an increase of 71% in weight and 40% in value YOY. Subsidized foreign currency at the rate of 42,000 rials per US dollar were allocated to import 14.4 million tons of essential goods worth $8.8 billion, registering a surge of 61% in weight and 32% in value YOY,” the IRICA chief said.
The main exporters to Iran were the UAE (6.9 million tons of goods worth $8.6 billion), China (1.9 million tons worth $6.1 billion), Turkey (2.5 million tons worth $2.9 billion), Germany (512,000 tons worth $1 billion) and Switzerland (1.2 million tons worth $1 billion.)
Cellphone devices, animal corn, wheat, soybeans, sunflower oil, soymeal, barley, rice, sugar and palm oil were the main imports during the period,
“A total of 6.94 million tons of foreign commodities were transported through Iran during the period, indicating an 81% year-on-year rise,” Mirashrafi 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).
Statistics released by Central Bank of Iran show that except in the month to Oct. 21 and the one to Nov. 20, Iran’s trade balance was negative every month of last year.
The two months registered 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 imports value with $4.57 billion weighing 2.92 million tons.
The lowest exports and imports value 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 the 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 buying raw materials for export products. Therefore, it caused a decline in exports during the period.
Currency shock is another reason behind the decline. One of the main variables affected by currency shocks is non-oil exports. Iran’s currency market faced an unpredicted shock in the fiscal 2020-21 due to the intensification of US sanctions, fall 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 its Department of Treasury banned transactions, purchases, credit and insurance services to Iran by other countries. Oil prices also impacted petrochemical exports and due to the low oil prices in the fiscal 2020-21 alongside the US sanctions, petrochemical products registered a decline in the period under review.
The Covid-19 pandemic was another reason behind the significant decrease in trade. The closure of borders, new standards for foreign trade and the wariness of countries buying exported products, especially agricultural and food products, caused a decrease in Iran’s foreign trade.
Iran and the US are holding indirect negotiations on a return to compliance to the 2015 Iran nuclear deal, formally known as Joint Comprehensive Plan of Action. Representatives of Britain, China, France, Germany, Russia and European Union shuttle between US and Iranian delegations.
JCPOA limited the scope of Iran's nuclear program. In return, the Islamic Republic received relief from US and international sanctions. Washington walked out of the deal under the administration of former president, Donald Trump, which caused economic pain to Iran.
With an agreement between the two countries and lifting of sanctions, some of these obstacles such as the US sanctions may be removed and there is an opportunity for Iran to increase its foreign trade.