The first two months of the current Iranian year (started March 21) has seen a reversal of last year’s decline in foreign trade.
Iran’s foreign trade reached 22.2 million tons worth $12.8 billion in the month leading to May 21, indicating a 6.6% and 38% growth in weight and value respectively compared with the same period of last year, Mehdi Mirashrafi, the head of the Islamic Republic of Iran Customs Administration, said on Wednesday.
“A total of 16.9 million tons of non-oil goods worth $6.3 billion were exported. Gasoline, polyethylene, methanol, steel ingot and other steel products were Iran’s main exports during the month [April 21-May 21],” he was quoted as saying by ISNA.
Exports increased by 17% in terms of weight and 48% in terms of value year-on-year. Top export destinations during the month under review were China with 4.6 million tons of non-oil goods worth $2 billion (up 17% in tonnage and 74% in value YOY), Iraq with 3.1 million tons worth $953 million (down 18% in weight and 13% in value), the UAE with 2.4 million tons worth $849 million (up 9% in weight and 25% in value), Turkey with 384,000 tons worth $388 million (up 14% in weight and 172% in value) and Afghanistan with 911,000 tons worth $365 million, indicating a decline of 14% in weight but an 8% increase in value.
The IRICA chief noted that exports to China, Iraq, Turkey, the UAE and Afghanistan amounted to 11.5 million tons of non-oil goods worth $4.6 billion, accounting for 68% and 73% of Iran’s overall exports in terms of weight and value, respectively.
“Imports reached 5.3 million tons worth $6.5 billion, indicating a 16.5% decline in weight but a 29.5% growth in value compared with the corresponding period of last year,” he said.
“Cellphones, corn, sunflower oil, soybean meal, wheat, soybeans, rice, barley, sugar and unprocessed soybean oil were Iran’s main imports last month. Imports of these 10 items totaled 3.7 million tons worth $2.1 billion and accounted for 69.5% and 33% of the country’s overall imports in terms of weight and value respectively.”
Top exporters to Iran were the UAE with 1.4 million tons of goods with $1.8 billion, China with 461,000 tons worth $1.5 billion, Turkey with 581,000 tons worth $642 million, Germany with 156,000 tons worth $285 million and Switzerland with 359,000 tons worth $283 million.
Mirashrafi said imports from the UAE rose by 114% and 181% in weight and value respectively compared with the last year’s same month while imports from Turkey decreased by 48% in weight and 42% in value, imports from Germany dropped by 54% in weight and 15% in value while imports from Switzerland surged by 2,642% in weight and 2,061% in value compared with the same month of last year.
“These five countries exported an aggregate of 2.96 million tons of goods worth $4.54 billion to Iran during the month under review to account for 55% of the country’s overall imports in weight and 70% of its imports in value,” he said.
“A total of 1.84 million tons of cargo were transited across the country during the second month of the current year, indicating a 142% increase YOY.”
Iran’s non-oil foreign trade in the first month of the current Iranian year (March 21-April 20) stood at 10.34 million tons worth $5.76 billion, indicating an increase of 32% and 62.5% respectively in weight and value compared year-on-year.
According to IRICA, exports accounted for 8.3 million tons worth $2.96 billion and imports constituted 2.04 million tons worth $2.79 billion of the total sum.
Exports show an increase of 56% in weight and 80% in value while imports register a decline of 18% in weight but an increase of 47% in value year-on-year.
Iran’s foreign non-oil trade stood at 145.7 million tons worth $73 billion in the last fiscal year (March 2020-21).
According to Mirashrafi, exports accounted for 112 million tons worth $34.52 billion and imports constituted 34.4 million tons worth $38.5 billion of the sum.
“Iran’s foreign trade reduced by 25 million tons due to sanctions and the Covid-19 pandemic,” he said, adding that the country’s trade deficit stood at $4 billion.
TPO on Decline in Fiscal 2020-21
Four main reasons were behind the decline in Iran’s foreign trade in the fiscal 2020-21 compared with the fiscal 2011-14, according to the Trade Promotion Organization of Iran.
The first reason was the decline in oil revenues. A portion of raw material costs are supplied by oil revenues. The decline in revenues caused problems in the way of foreign exchange earnings and the purchase of raw materials for export products. Therefore, it caused a decline in the volume of exports in the mentioned period.
Currency shock is another reason behind the decline. One of the main variables affected by currency shocks is the export of non-oil goods. Iran’s currency market faced an unpredicted shock in the fiscal 2020-21 due to the intensification of US sanctions, the decline 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 the foreign currency market to stabilize.
The US sanctioned 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 the low oil prices in the fiscal 2020-21 alongside the US sanctions, petrochemical products registered a decline in the period under review.
Coronavirus pandemic was another reason behind the significant decrease in trade. The closure of borders, new standards for foreign trade and the disinclination of other countries for buying exported products, especially agricultural and food products, caused a decline 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 the 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 for relief from international sanctions and economic benefits. 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 the US sanctions may be removed and there is an opportunity for Iran to increase its foreign trade.
