Iran Trade With EU Plunges

EghtesadOnline: Trade between Iran and EU member states during the first month of 2019 stood at €343.38 million to register an 82.72% decline compared with last year’s corresponding period.

News ID: ۷۴۷۰۴۲

13 April 2019

Iran’s trade with Cyprus and Slovenia saw a 48.84% and 20.23% rise respectively. These were the only two EU members with which Iran experienced an increase in commercial exchanges.

The country’s trade with the remaining 26 EU member states all declined, according to Financial Tribune.

Trade with Greece (€3.47 million), Latvia (€ 46,902), Poland (€3.31 million), Romania (€2.16 million) and Spain (€16.2 million) saw the sharpest decline of 97.82%, 95.17%, 95.16%, 94.73% and 94.36% respectively, Eurostat show.

Eurostat (European Statistical Office) is a directorate general of the European Commission located in Luxembourg. Its main responsibilities are to provide statistical information to the institutions of European Union and to promote the harmonization of statistical methods across its member states and candidates for accession as well as EFTA countries: Iceland, Liechtenstein, Norway, and Switzerland.

Organizations in different countries cooperating with Eurostat are summarized under the European Statistical System.

Exports Down 95%

Iran exported €53.7 million worth of commodities to European Union member states during the one-month period, indicating a 95.42% fall compared with the similar period of the preceding year.

The main export destinations over the period were Germany (€21.17 million), Italy (€9.74 million), Spain (€5.55 million), Romania (€2.1 million) and Bulgaria (€1.99 million).

Iran’s exports to Luxembourg, Portugal and Denmark experienced the highest growth of 6,157%, 240.92% and 66.66% respectively, the report reads.

This is while exports to France, Greece and Spain saw the sharpest decline of 99.65%, 99.27% and 97.68% respectively YOY.

The exported goods mainly included minerals, edible fruit and nuts, zest of citrus fruit or melons (€11.21 million), coffee, tea, mate and spices (€6.57 million), plastic and plastic products (€5.31 million), pharmaceutical products (€4.1 million), carpets and other textile floor coverings (€3.42 million), products of animal origin (€2.69 million), articles of iron and steel (€2 million), lac, gums, resins and other vegetable saps and extracts (€1.82 million) and iron and steel (€1.4 million).

Import Down 64%

Imports from the 28 EU member states plummeted by around 64.39% to stand at €289.69 million over the same period.

The top five exporters from the European bloc to Iran were Germany (€102.17 million), the Netherlands (€46.68 million), Italy (€38.55 million), France (€25.58 million) and Spain (€10.64 million).

Iran’s imports from all European Union states saw a decline over January with Romania, Luxembourg and Latvia experiencing the sharpest fall of 99.79%, 97% and 96.9% respectively.

The imports mainly included pharmaceutical products (€72.36 million), nuclear reactors, boilers, machinery and mechanical appliances and parts (€56.92 million), optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus (€27.83 million), electrical machinery and equipment (€14.45 million), cereals (€13.51 million), organic chemicals (€10.53 million), miscellaneous chemical products (€9.07 million), plastics and plastic articles (€8.53 million), manmade staple fibers (€6.5 million) and essential oils and resinoids, perfumery, cosmetic or toilet preparations (€6.11 million).

November U-Turn

The nosedive in bilateral trade started from November 2018 when commercial exchanges declined by 66.02% year-on-year to stand at €679.55 million. Iran’s exports hit €209.98 million in November, registering a 78.12% plunge as imports fell by 54.86% to reach €469.56 million.

That’s when the United States began to impose the second tranche of sanctions self-proclaimed as "toughest sanctions ever" against the Islamic Republic after the first wave hit in August, impeding Iran's trade with major countries.

The sanctions were implemented after US President Donald Trump announced in May his country's unilateral walkout from the nuclear deal it signed together with five other world powers, namely the UK, Germany, France, China and Russia.

The deal, better known as the Joint Comprehensive Plan of Action, was signed in 2015 and implemented a year later. It saw the removal of years of international sanctions against Iran. In exchange, the Islamic Republic agreed to limit the scope of its nuclear program.

More than €18.39 billion worth of commodities were traded between Iran and the European Union member states in 2018, registering a 12.2% decline compared with the value of commercial exchanges in the previous year.

Trade balance tilted toward Iran, registering a €550 million surplus with EU states last year, indicating significant improvement compared to the €704.06 million deficit in 2017.

Iran-EU trade stood at more than €20.95 billion during 2017, showing a 52.41% increase compared with the 2016 figures.

Efforts to Facilitate Trade

France, Germany and Britain recently opened a new channel for non-dollar trade with Iran, dubbed Instrument in Support of Trade Exchanges (INSTEX), to avert US sanctions, although diplomats say it is unlikely to allow the big transactions that Tehran says it needs to keep a nuclear deal afloat.

Washington’s major European allies opposed last year’s decision by US President Donald Trump to abandon the 2015 deal, under which international sanctions on Iran were lifted in return for Tehran accepting curbs on its nuclear program.

INSTEX is headquartered in Paris with a German chief executive officer. Germany, France and the UK are shareholders.

The mechanism “will allow for legitimate trade to continue as foreseen in the nuclear agreement”, EU foreign policy chief, Federica Mogherini, has been quoted as saying.

Governor of the Central Bank of Iran Abdolnasser Hemmati said the corresponding entity to INSTEX, also known as Special Purpose Vehicle, will be registered soon in Tehran.

According to a statement released by CBI, Hemmati said the creation of the institution does not mean that Iran would "wait upon" Europe to operationalize INSTEX.

"We will continue our strategy to access finance and trade for our country through neighbors and other trading partners," he said.

The CBI first greenlighted the mirror entity to INSTEX in February after the global anti-money laundering body decided to extend the suspension of countermeasures against Iran for four more months, recognizing the government’s efforts to accept its Action Plan.

CBI welcomed FATF's move, hoping that the two remaining bills (part of Iran's Action Plan with FATF) would be finalized soon. The bank said in order to show its goodwill, it will introduce the corresponding entity to match the European INSTEX.

INSTEX was launched by the EU on Jan. 30 to shield Iran’s trade from the new US sanctions announced last year.

In a recent talk with Financial Tribune, the UK Trade Commissioner to Middle East, Afghanistan and Pakistan Simon Penney said the focus of technical team comprising E3 and EU officials will be on creating a counterparty mirror entity in Iran.

"This is because we need the two ends of the SPV: one in Europe and one here in Iran and we have heard some encouraging comments around the work that Iran is doing to make sure that the counterparty mirror SPV will be created," he said.

According to the official, INSTEX will operate "simplistically on a netting basis" so the idea is to minimize the flow of physical cash or money across the border in and out of Iran and is predicated on having equal debits and credits on both sides.