Iran’s exports to Iraq reached 8.66 million tons worth $2.96 billion during the first five months of the current fiscal year (March 21-Aug. 22), registering a 28% and 8% decline in terms of weight and value respectively compared with the corresponding period of last year, according to the head of Iran-Iraq Chamber of Commerce.
“Unfortunately, after the abolition of import subsidies, the price of Iranian goods rose above global prices, and the first reaction of buyers was to resist and decline to buy Iranian goods,” Jahanbakhsh Sanjabi-Shirazi was also quoted as saying by ILNA.
The government decided to overhaul the import subsidy system in May, which led to a dramatic rise in prices.
The government move saw the abolition of the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as the Preferential Foreign Currency, to import essential goods, including corn, soymeal, unprocessed oil, oilseeds and barley, in addition to wheat, flour and medicine.
The market value of the dollar is currently above 300,000 rials.
“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the Preferential Foreign Currency has not been ceased, rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move in May.
In his speech, Raisi emphasized that the removal of cheap dollar allocation will not lead to a price rise in wheat, flour and medicine.
However, the move led to a dramatic rise in the prices of essential goods. In fact, the prices of all commodities and services have also risen suddenly in a ripple effect.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
No Rise in Trade Volume in Real Terms
The claim that trade volume increased during the first five months of the current year [as stated by the Islamic Republic of Iran Customs Administration] is not correct and should be viewed with skepticism, Sanjabi-Shirazi said.
The official noted that the reported increase in the volume of Iran’s foreign trade is due to the rise in prices and said Iran exported a total of 44.07 million tons worth $20.92 billion during the first five months of the current fiscal year. The figures stood at 45.67 million tons worth over $17.25 billion during last year’s corresponding period.
Although the value has increased by 21% year-on-year, the tonnage has decreased by 3.5%, or 1.6 million tons.
“This difference is due to the increase in global prices and our exported goods were not an exception,” he added.
Iraq is among the most important trade partner of Iran as it accounted for 19.64% and 14.15% of the weight and value of total export respectively.
This is while in the corresponding period of last year, Iraq accounted for 26.61% and 18.67% of the weight and value of total exports, respectively.
“In the fifth month of the year [Jul. 23-Aug. 22] we made up for the export lag experienced during the first four months,” Sanjabi-Shirazi said.
The director general of the Trade Promotion Organization of Iran’s Arab and African Affairs Department says the main reason for the decrease in exports to Iraq is related to the decrease in gas and gasoline shipments.
Gas export to Iraq has decreased by 60% and gasoline by 80%.
“From 100 types of Iranian goods exported to Iraq, 20 saw decline and 80 registered a rise,” Farzad Piltan was also quoted as saying by Mehr News Agency.
Border Closure During Arbaeen Pilgrimage
Iran recently reopened its border crossings to Iraq for resumption of exports, according to a local official, after they were closed due to a massive influx of pilgrims.
“Starting September 5, exports from Chazzabeh and Shalamcheh came to a temporary halt as Iranians headed to the city of Karbala for Arbaeen pilgrimage. The last group of pilgrims returned on Sept. 21 and the borders reopened subsequently,” Behrouz Qarehbeigi was also quoted as saying by IRNA.
The official noted that during the pilgrimage season, Iran exported to Iraq’s ports of Basra and Abu Flous through the Khorramshahr marine border.
“Last year [March 2021-22], we exported a total of $1 billion worth of goods, mainly foodstuff, fruit and vegetables, home appliances, seafood and construction material, to Iraq through Chazzabeh and Shalamcheh,” he added.
Iraq hosts over two million Iranians every year during Arbaeen, a major Shia event marking the 40th-day anniversary of the martyrdom of Imam Hussein (PBUH), the grandson of Prophet Muhammad (PBUH), and his 72 family members and companions.
Iran’s total of six border crossings with Iraq were closed to Arbaeen pilgrims earlier this month, causing problems on the Iranian side of the borders and Iranian officials asked passengers to avoid land border crossings for a few days, Fars News Agency reported.
Among the shortcomings at the border crossings that left many passengers stranded were the lack of buses and a limited number of entry gates on the Iraqi side, as well as the shortage of water and food supplies for passengers stranded at the borders.
Majid Mir-Ahmadi, the head of Arbaeen Central Headquarters, said Iran sent buses to Iraq to help with the situation.
Iran’s exports to Iraq via three border crossings of Shalamcheh, Chazzabeh and Mehran were declared suspended until Sept. 17 to make room for pilgrims traffic during the Arbaeen commemoration season, the spokesperson of the Islamic Republic of Iran Customs Administration said, adding that traders could use other border crossings, namely Parvizkhan, Soumar, Shoshemi, Sheikh Saleh and Khorramshahr’s marine border crossing.
“The measure has been taken because these border crossings do not have the capacity to accommodate both pilgrims and exporting trucks at the same time,” Rouhollah Latifi was also quoted as saying by IRNA.
Iran’s non-oil exports from Chazzabeh and Shalamcheh border markets in Khuzestan Province hit $312 million during the five months to Aug. 22, Qarehbeigi added.
“Exports from Shalamcheh Customs Office stood at 1.28 million tons worth $246 million. We also exported around 261,000 tons of goods worth $66 million to Iraq through Chazzabeh,” he was quoted as saying by IRNA.
The official said that during this period, exports to Iraq took place through Khorramshahr’s marine border crossing through which commodities were dispatched to Iraq’s ports of Basra and Abu Flous.
Mehran crossing also reopened on Sept. 24 after a 20-day closure due to the Arbaeen pilgrimage, according to Rouhollah Gholami, a local official.
“A total of 1.58 million tons of goods worth $734 million were exported via Mehran border in the first half of the current year [started March 21], indicating an increase of 73% in weight and 57% in value year-on-year,” he was quoted as saying by IRNA.
