What is the reason behind the decline in Iran’s exports to Iraq, Afghanistan and other neighboring countries? Why did Pakistan decide to part ways with Iran in energy trade? What is Iran’s reaction to efforts made by Turkey and China to grab Iran’s export markets? All these questions are being asked in economic and general forums these days. Although it is being advertised that the government of Ebrahim Raisi has focused on economic diplomacy with neighboring countries, facts contradict this. Achievements, if any, should be manifested in numbers. Hamid Hosseini, an economic analyst, prefaced his article for the Persian daily Ta’adol with this note. A translation of the text follows:
The export of certain commodities to Turkey, India and China shows insignificant improvements, but Iran has lost its position in exports to Iraq and Afghanistan.
Eight-month [March 21-Nov. 21] trade statistics show Iran has registered a trade deficit of $5 billion; exports don’t exceed $4 billion a month. If the trend were to continue, Iran will register a 4.4% increase in exports in terms of value and a sharp decline in terms of weight. Increase in the value of exports is because of the rise in the prices of liquefied gas, petroleum products, petrochemicals and steel in the first half of the current fiscal year [started March 21] following the outbreak of war between Russia and Ukraine. Chances are that prices will decrease in H2 and Iran’s exports will follow suit.
Iran’s exports to Iraq stood at $6.1 billion during the same period of last year but have dropped to $4.7 billion this year. This is while Iraq’s income has been much higher than last year; the country is likely to earn $100 billion by the end of the year. Iran accounted for $9 billion of Iraq’s $40 billion imports so naturally Iran should be accounting for $20 billion now that the neighboring country earns $100 billion. That’s what has happened to China and Turkey, but due to several reasons Iran has not performed well in the markets of Iraq and Afghanistan.
One of the reasons is that Iran is a major exporter of petroleum products, which sells gasoline and diesel to Iraq and Afghanistan. Given the increase in domestic consumption and decrease in production, Iran’s exports have declined. The removal of import subsidies, which was a correct decision, also disrupted the production of these items.
Food accounted for a considerable share of Iran’s exports; the rise in the prices of conserved food, pasta, chocolate and biscuits led to a decline in exports. The only remaining exported products are construction materials, the export capacity of which is limited.
Furthermore, sanctions have also impacted exports. The export of technical and engineering services is profitable; it facilitates exports of a range of other items. Now that Iran has lost this market, rivals are exporting similar items.
This decline is partly blamed on the economic decision-making system; the government levies tariff on exports of many goods; the 0.5% tariff on agricultural products such as saffron, for instance, is really high. Measures like this discourage exporters and prod them into smuggling and illegal supply of products, which is the direct outcome of government mismanagement. The government does not allow export of livestock, hence stockbreeders smuggle their livestock to Iraq. Such a course of action has been taken for the past 7-8 months, which has reduced Iran’s share of the regional markets.
Forums must be held to identify why Iran’s commercial capacities have declined so drastically. The frightening point is that no one cares about the fall in exports. Senior officials seem to be only asking for growth reports (even fake ones). Such a trend must change.
We need to know why Turkey and China are seizing Iran’s regional export market but Iran is not reacting. We need to think about it today, as tomorrow will be too late.
