Iran's Foreign Trade Conducted Mainly in Euro, Yuan

Department of Economic Review of Tehran Chamber of Commerce, Industries, Mine and Agriculture (TCCIMA) has published a report about allocation of subsidized foreign currency saying that the CBI sold importers 13 types of subsidized currencies valued at  $29.72 billion from  March 2018 to May 2019.

As per the data, 12.9 billion euro was allocated to importers, accounting for more than 44% of the total. This was followed by the Chinese currency worth ¥43.2 billion. A large part of this currency went to car companies. 

India’s rupee was next with Rs 198 billion followed by the Turkish lira with TL 10 billion, and the Russian ruble with RUB 97 billion. This is while the USD was 12th with $6.6 million, Financial Tribune reported.

Subsidized rates are calculated based on 42,000 rials to the dollar.

Data showed that the US currency was paid to a charity in the previous fiscal. According to a notice published by the CBI last week, the charity was not involved in any business and the money was for reimbursing an overdue debt to the National Development Fund of Iran, the country’s sovereign wealth fund.  

In a move to encourage non-dollar trade and switch to euro, the Ministry of Industries, Mining and Trade in March 2018 banned all import orders based on the US currency. 

The ban was anticipated, considering Iran's efforts to ditch the greenback in its foreign trade in response to a US announcement at the time that it was banning dollar transactions by Iranians. 

Minus the forex given to the charity, the CBI did not allocate subsidized dollars for importing essential goods during the period. 

20 Main Importers

The subsidized currency was paid to over 9,000 natural and legal entities. About 25% of the total went to 20 companies. Mahidasht Kermanshah Agricultural Industrial Complex, state-run Government Trading Corporation of Iran - affiliated to the Ministry of Commerce, and Ava Tejarat-e Saba topped  the list, respectively receiving 3.2%, 2.4%, and 2.1% of the total forex. 

AVA Tejarat-e-Saba Company is a major importer of animal feedstock and soybean oil. 

The Ministry of Industries said from the beginning of the previous fiscal (March 21, 2018) to February 23, close to $8.2 billion was paid for importing basic goods and animal feedstock. 

Of the allocated amount, over $1.5 billion was allotted for  importing rice, $830 million for red meat, $14.8 million for  eggs, $1.1 billion for edible oil, $41 million for live sheep and cows, $1.9 billion for soybean, $1.9  billion maize grain (corn),  and $839 million for barley.   

As per law, companies get subsidized currency for importing basic goods. Subsidized currency is cheaper than rates quoted on Nima (integrated forex deals system) where the greenback on average sells for 110,000 rials. 

Nima is platform where exporters sell their currency earnings to importers of non-essential goods. Forex rates at Nima are lower than the open market rates and higher than subsidized rates. 

However, it has been reported that the current subsidy system for basic goods is expected to be revised due to the inherent inefficiencies and loopholes. 

Based on the current budget, the government is obliged to allocate $14 billion from oil export revenue to import essential goods, namely essential goods, pharmaceuticals, medical equipment and grains.