Economy, Domestic Economy

Russian Hopes for Iran Trade Boom Run Aground at Astrakhan

Russian Hopes for Iran Trade Boom Run Aground at AstrakhanRussian Hopes for Iran Trade Boom Run Aground at Astrakhan

When sanctions on Iran were lifted in January, Russia might have expected to be near the front of the queue for business opportunities.

On the evidence of commerce passing through the Caspian Sea port of Astrakhan, the main jumping-off point for Russian seaborne trade with Iran, it’s not playing out like that.

The value of goods shipped from the Astrakhan region to Iran in the first four months of this year was down 16% on the same period last year, according to the regional government, Reuters reported.

“There’s a pause with grain, timber products are being loaded, metal gets shipped very rarely and then only in very small consignments,” said Artyom Ulyanov, commercial director of Astrakhan’s central cargo port. “Overall, we’re loading less than we did in previous periods.”

That, according to traders and shipping industry sources, is partly because Russian red tape is choking trade at a time when Iranians can do deals with western countries that were effectively closed off to them before because of sanctions.

The mood around the wharfs and dockyards at Astrakhan, Russia’s biggest Caspian Sea port, is sour.

On a visit late last month, a Reuters correspondent found that cranes in several sections of the port were standing still because there was no cargo to move.

“Before, we had to search for ships” to carry cargo to Iran because the volume of the trade was so high, said the owner of a grain-exporting company that supplies Iran, speaking of trade before the anti-Iran sanctions were lifted.

Now, said the businessman, who asked not to be identified so he could speak candidly, ship operators came knocking on his door looking for business.

Last month, Russia’s Ministry for Economic Development organized a Russian-Iranian business forum meant to take place in Astrakhan. Russian Energy Minister Alexander Novak was scheduled to attend.

It was called off, with the local government citing “circumstances that have arisen”. Some participants only found out the event was off when they were already on the way there.

“We and another thousand people from Iran got tickets and visas, but they called off the forum two days before it starts,” said Taban Tizgush, president of the Chamber of Commerce, Industries, Mines and Agriculture in the Iranian province of Gilan, on the Caspian Sea.

“That causes us a lot of damage.”

In an interview with Reuters, Alexander Zhilkin, the Astrakhan region governor, said grain exports this year would be lower than in 2015 because Iran was enforcing temporary grain import restrictions.

  Red Tape Creates Obstacles

Nonetheless, Zhilkin said he expected trade to double within 18 months of all the international sanctions being lifted on Iran.

“Petrochemicals, paper, glass, wood, wood products; there is demand for all of that,” he said. “This year, unexpectedly, we’ve had requests from Iran for potatoes and onions.”

However, local business people say the deeper problem is not demand.

Traders who move goods through Astrakhan to Iran talk of layers of red tape that can hold up cargoes for months, of corrupt officials withholding permissions, and of import and export regulations changing without warning.

“That’s why our share of trade with Iran is pitifully small,” said Alexander Rybakov, finance director of RusIranExpo, an exporters’ union.

Despite those issues, during the years of sanctions, trade was healthy. That was in part because Russian companies were prepared to take the risk of doing transactions with Iran, while many other countries were not.

The main exports via Astrakhan-wheat, timber and scrap metal-were not banned by sanctions. But the international restrictions imposed over Tehran’s nuclear program effectively barred Iran from international financial systems, so settling bills was complicated.

Russian firms found ways around that, by using intermediary banks in third countries. Grain exports from Russia to Iran grew while sanctions were in force.

But with sanctions gone, businesspeople in Astrakhan predict that big global grain traders will now move into the Iran market, squeezing out Russian players.

The big global traders will have lower costs because they can deliver grain on vessels of up to 70,000 tons via Iran’s Persian Gulf ports, while the maximum size of vessels in the Caspian is 6,000 tons, said Hossein Lotfi, owner of a trading firm.

“If Russia does not take steps to hold onto its trade with Iran, it could lose 20 to 30 percent of grain exports,” said Lotfi, who is also a consultant to Astrakhan’s chamber of commerce with Iran.

“Once payments are simplified, new players could come into the south of Iran, and they can offer lower prices.”