Iran's Trade Woes in the Time of Coronavirus Crisis

Export prices of iron ore, iron ore concentrate and copper declined by 40% in the first quarter of the current year (March 20-June 20), suggesting that Iran's non-oil export revenues won’t exceed $30 billion by March 20, 2021, says Majid Reza Hariri, the chairman of Iran-China Chamber of Commerce.
“Global trade has dropped by 30% following the outbreak of coronavirus, and Iran is no exception. Seven countries, including China, Iraq, Afghanistan, the UAE and India, account for 75% of our foreign trade; over 50% of Iran’s non-oil exports are headed to Iraq and China, all indicative of our export vulnerability. Losing one export market leads to disruptions in export equilibrium and consequences for the whole economy,” he was quoted as saying by Fars News Agency.   
“Natural gas, gas condensates, petrochemicals and unprocessed minerals make up 70% of Iran's exports. Covid-19 has pushed down the demand for and the prices of these exported items. For our production lines to remain operational, about $45 billion worth of essential goods, pharmaceuticals and medical equipment need to be imported. Given the restrictions placed on oil sales, this figure appears to be unreachable.”
Iran’s foreign trade stood at $19.63 billion during the first four months of the current fiscal year (March 20-July 21), of which exports accounted for $8.71 billion and imports constituted $10.92 billion, the Islamic Republic of Iran Customs Administration reported.  
As a result, the country posted a trade deficit of $2.21 billion over the four months.

“Running a trade deficit is not a new thing for Iran; the country’s non-oil exports are not large enough to afford the imports. Over the past four years, imports have been on the decline,” Hariri said. 
Iran traded over 42.07 million tons of non-oil goods during the four-month period, of which exports weighed 30.28 million tons and imports 11.79 million tons.
When compared with the corresponding period of last year (March 21-July 22, 2019), exports and imports registered a 39% and 1% decline in tonnage and 40% and 24% decrease in value respectively.
China was Iran’s main export destination, purchasing 8.46 million tons of non-oil goods worth $2.47 billion from us during the four-month period ending July 21 to account for more than 28% of Iran’s total exports. 
It was followed by Iraq with 6.44 million tons worth $1.96 billion and a share of more than 22% of Iran’s exports, the UAE with 4.62 million tons worth $1.21 billion and a share of 14%, Afghanistan with 2.11 million tons worth $713 million and a share of 8% and Turkey with 843,000 tons worth $405 million and a share of 5% from Iran’s total exports.
Iran’s top five partners in imports were China with 1 million tons worth $2.8 billion and a share of more than 25% of Iran’s total imports, the UAE with 1.33 million tons of non-oil goods worth $2.47 billion and a share of 23%, Turkey with 1.87 million tons worth $1.17 billion and a share of 11%, India with 939,000 tons of non-oil goods worth $757 million and a share of 7% and Germany with 493,000 tons of goods worth $536 million and the share of 5%.

Forex Repatriation  

Asked whether he believes that the new directives of the Central Bank of Iran on export revenue repatriation would result in a decline in exports, Hariri said state-run companies and semi-governmental corporations affiliated to various foundations account for 80% of non-oil exports.
“Let's say the private sector has failed to return $8-10 billion of its export earnings to the country; that is an insignificant amount of money to be considered effective in reducing non-oil exports,” he added.
Underlying the necessity of export income repatriation to the country’s business transactions, Hariri said it is better for a country not to have exports at all rather than see export earnings spent on buying smuggled goods, or purchasing homes in Turkey, Canada and European countries. 
Last week, CBI said it had provided the judiciary with a list of 250 export companies and individuals who had not complied with the forex repatriation rules.
"An estimated 2,386 exporters failed to repatriate €17.7 billion from March 2019 to July 2020. This amount is expected to increase and CBI is working with the Ministry of Industries, Mining and Trade and the judiciary," Samad Karimi, the head of CBI's Export Department, told Tasnim News Agency. 
Individuals on that list returned €440 million after their names were sent to the judiciary, he added. 
Karimi said CBI has prepared a new list of non-compliant exporters for the judiciary to take necessary legal action. 
Judiciary officials say CBI should not hesitate when it comes to exposing the identities and names of defaulters.  
"Nearly 1,200 cases are still open regarding CBI's list of exporters and 445 people are in custody. We believe that CBI should change its approach toward illegal operations in the forex market and take lawbreakers to court," without further delay, Mohammad Reza Sahebi Pasandideh, a Tehran deputy prosecutor general, was quoted as saying by the news agency.    
The issue of repatriating export earnings has gained relevance after turmoil in the forex market was linked to shortage of currency offered via the Integrated Forex Deals System, locally known as Nima. 
Nima is a secondary market developed by the Central Bank of Iran to be used as a venue where companies sell their export earnings at rates lower than the open market. The currencies sold on Nima will help fund imports.
Rates in the secondary market are lower compared to those in the market.
The confusion compelled the central bank to issue an ultimatum to exporters to respect their financial commitments by July 21. Failing to comply would oblige the CBI to name and shame the defaulters, the regulator warned.
Export companies have not returned $27.5 billion of their overseas revenues over the past two years, CBI reported.
As per the new regulations, exporters must bring back at least 80% of their earnings in “foreign exchange hawala” and maximum 20% in hard currency. The proceeds must be sold via the secondary forex market to banks and authorized exchange bureaus.