Qatar, Oman Becoming Iran's New Trade Gateways

EghtesadOnline: Iran is working to curb its trade ties with the UAE, replacing its traditional hub for trade activities, Dubai, with Doha in Qatar and Muscat in Oman.

News ID: ۷۴۵۰۵۵

25 February 2018

The measure has been pursued for a long time now, but the recent tensions in political relations between Iran and the UAE, along with the Persian Gulf state’s pressure on Iranian traders, mostly over value-added tax, visa issuance and banking restrictions, have made Iranian officials to pursue the plan more seriously.

Earlier this month, the Central Bank of Iran’s deputy for international affairs referred to several obstacles created by Emirati banks for Iranian merchants, saying Iran is seeking other alternatives in the Persian Gulf region to replace the UAE in its banking transactions with Iran.

"The political stance espoused by the UAE is in opposition to Iran and bilateral relations are currently at a low ebb," Hossein Yaqoubi was also quoted as saying by Financial Tribune.

The official noted that Iran's relations with Oman and Qatar are growing and considering the expansion of corresponding relations with these states, it is proposed that they replace the UAE as the main trade hub for Iran.

The UAE acted as Iran’s unofficial backdoor over the years Iran was under international sanctions because of its nuclear program, while distribution and supply chain channels are already carved out in these markets.

In fact, Jebel Ali Port played an active role in UAE-Iran trade, which mostly came in the form of re-exports in the sanctions era.

Adnan Musapour, the head of Iran-Qatar Chamber of Commerce, believes that Qatar and Oman have the potential to facilitate Iran’s trade with the world, though “it will be definitely a time-consuming process considering the huge volume of trade between Iran and the UAE at present”.

“But we should not cut off our trade ties with the UAE … The Persian Gulf state was our only trade gateway during the sanctions,” he told Financial Tribune.

The Arab state continues to be a top trading partner for Iran.

The latest data released by Islamic Republic of Iran Customs Administration show that trade between Iran and UAE increased by 9.2% during the 10 months to Jan. 21, 2018, to reach $12.9 billion.

Iran’s non-oil exports to the UAE experienced a $1.2 billion drop (18.9%) year-on-year to reach $5.13 billion. However, imports from the Persian Gulf state increased by 40% during the period to stand at $7.78 billion.

The Arab state was Iran's second biggest importer of Iranian goods as well as second biggest exporter to Iran after China.

Unlike exporters, who have seemingly managed to reestablish direct ties with their foreign partners, importers seem to favor basing their activities in Dubai.

Working With Qatar to Clear Banking Hurdles

Economic relations between Iran and Qatar have been gradually improving. Iran's exports to Qatar reached $215 million during the 11 months to February 20, significantly higher than the previous year’s $92 million.

Iran's import from Qatar experienced a 157% growth during the 10 months to Jan. 21, though the value of imports amounted to only $21 million.

Banking, however, seems to be still an issue for Iranian traders moving to Qatar.

To address the issue, CBI recently permitted Iranian banks to purchase Qatari riyal from traders.

“After several meetings held by traders, exporters and representatives of the Central Bank of Iran, Bank Saderat and Bank Melli Iran, the process of transferring hard currency resulting from exports to Qatar into the country was streamlined,” said Deputy Minister of Industries, Mining and Trade Mojtaba Khosrotaj who also doubles as chairman of Trade Promotion Organization of Iran.

As of Jan. 28, a day after CBI made the first purchase deal, Bank Saderat changed its base purchase price to the price announced by the regulator.

A group of Iranian lenders have also managed to establish banking relations with major Qatari lenders.

The recent establishment of Iran-Qatar Chamber of Commerce is also expected to have a significant impact on cementing ties, as lack of a single body for holding economic negotiations with the Persian Gulf state has disrupted mutual business engagement between Iranian and Qatari traders.

According to Musapour, the joint chamber is set to help channelize Iranian firms’ presence in the country.

“Our goal is to minimize destructive competition between Iranian traders in Qatari market,” he said.

Oman Advantages

Iran’s commercial ties with Oman have made considerable improvements since the lifting of the sanctions in 2016, Mohsen Zarrabi, the head of Iran-Oman Chamber of Commerce, said.

“Many of the banking obstacles have been removed in recent months … Iranians can easily start reexporting from the country.”

According to Zarrabi, the establishment of direct shipping routes, easier terms for obtaining visa and the Omani government’s special incentives for Iranian businesses are the main factors making the friendly neighboring country an ideal hub for Iranian traders.

Abbas Abdolkhani, Iran’s commercial attache in Oman, believes that a large number of Iranian firms in Dubai will soon start relocating their business to Oman.

“Levying VAT on banking transactions has raised concerns among Iranian traders in Dubai,” the Trade Promotion Organization of Iran's website quoted Abdolkhani as saying.

Iran's imports from Oman stood at only $150 million during the 10 months to Jan. 21, 2018, though it was 50% higher compared with the same period of last year.

“Oman has signed many trade deals with western, Latin American, Asian and African countries. The country offers low tariffs as a result of those agreements, which make it a good medium for Iran to expand its trade activities,” Abdolkhani said.

Omani officials have announced that investments in Sohar Port are excluded from customs duties and investors enjoy tax exemption for 25 years.

All three branches of Bank Melli Iran and Bank Saderat Iran in Oman have resumed operations. Bank Muscat is also expected to launch a branch in Tehran. The Omani lender started issuing letters of credit for Iranian traders right after the lifting of the sanctions in Jan. 2016.

Middle East Bank, Sina Bank and Saman Bank have reportedly announced their readiness to provide financial services to traders working in Oman.

Close political and cultural ties between Iran and Oman also boost Oman’s chances of attracting a high number of Iranian businesses in the coming years.