Iran Risks Losing Afghan Market to Turkey

EghtesadOnline: Turkey is now overtaking Iran’s place in commercial exchanges with Afghanistan due to economic restrictions imposed by the Islamic Republic in the face of sanctions, says the head of Iran-Afghanistan Chamber of Commerce.

News ID: ۷۴۸۹۲۹

12 November 2019

Noting that trade is a two-way business, Hossein Salimi added that since Iran’s Agriculture Ministry has banned the import of some crops to support domestic producers, Iran-Afghanistan bilateral trade has been adversely affected.

He noted that Afghans also want to export their agro products to Iran but have failed to do so due to Iranian restrictions, Fars News Agency reported.

The list of Iran's banned imports has become longer, as the government unfolded its latest foreign trade decision that added 120 goods to the previous list of 1,530, according to Financial Tribune.

The decision was made by the heads of the three branches of power in the last week's meeting of the Supreme Council of Economic Coordination in response to a call by Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.

Iran Bans More Imports

Last year, the government banned the import of 1,339 items categorized as “Group Four” products that are “non-essential” and have “counterparts made at home” to economize on foreign currency.

The Ministry of Industries, Mining and Trade has been tasked with identifying imports that are either unnecessary or those which local enterprises have the capability to produce, Deputy Industries Minister Hossein Modarres Khiyabani told Tasnim News Agency.

“The time is ripe for the manufacturing sector of the country to leap forward both in terms of quantity and quality, as resorting to imports is not justifiable due to the high exchange rate of foreign currencies,” he added.

With the new decision, Khiyabani said, different subsectors of industries will boost their potentials to increase their production capacity and rid themselves of dependency.

“Imports will now be restricted to two groups of commodities: essential goods that are directly related to people’s food basket, in addition to raw materials, machinery parts and equipment needed by manufacturing enterprises,” he said.

Meager Share of Afghan Exports in Bilateral Trade

Salimi said that to promote commercial exchanges, there must be bilateral interactions.

“This is while we are only seeking to export and this has limited our business opportunities. Our absence in foreign markets has provided other countries, including Turkey, with export opportunities,” he said.

Afghanistan mainly exports agro products such as walnut and pomegranate to countries like China, Turkey and Canada, but Iran has banned the import of these crops into the country.

Apart from the issue of trade restrictions adopted by Iranian authorities in the face of US sanctions, Afghanistan's export products are found profusely in local markets.

As a case in point, Iran is said to be the leading pomegranate producer in the world followed by India, China, Turkey and the US.

“Iran’s pomegranate production will reach 900,000 tons by the end of the current Iranian year [March 19, 2020],” says Zahra Jalili Moqaddam, an official with the Agriculture Ministry.

The provinces of Fars, Isfahan, Khorasan Razavi, South Khorasan, Yazd, Markazi, Semnan and Lorestan are top producers of pomegranate in Iran, IRIB News reported.

According to the official, Iran exported 15,000 tons of pomegranates worth $15 million to Russia, Iraq, South Korea, Switzerland, France and Germany in the last Iranian year (March 2018-19).

She says the export capacity is 10 times more, as it has reached 150,000 tons per year.

Major Destinations for Iranian Exports

Afghanistan has for long been a major destination of Iranian products.

In fact, Iran's exports to Afghanistan are three times more than overall exports to 28 member states of the European Union, says Iran’s Ambassador in Kabul Bahador Aminian, highlighting that trade with Afghanistan is of high value to Tehran.

“Developing trade ties with Afghanistan is Iran’s priority because the two countries are neighbors,” Aminian had said earlier this month, addressing the Working Group for Export Development and Council for Organizing Border Exchanges of South Khorasan Province, Fars News Agency reported.

“Afghanistan is Iran’s priority in our Resistance Economy policies, as it is our neighbor and has a good share of exported products,” he added.

He mentioned that Iran’s exports to the 28 European Union countries are only a third of what it exports to Afghanistan.

Aminian called on Iran’s private sector to play a more prominent role in exports to the country’s eastern neighbor.

He noted that Iran is active in establishing universities and vocational schools in Afghanistan and forging bilateral ties in agriculture and health tourism.

The Iranian envoy stressed that Iranian businessmen should establish joint ventures in Afghanistan’s industrial estates to be able to later export to other countries, including Europe.

South Khorasan’s Deputy Governor General for Coordination of Economic Affairs Moshirolhaq Abedi urged better and faster connection between the Iranian and Afghan provinces, including Farah.

South Khorasan shares 331 kilometers of land border with Afghanistan, according to the official.

Iran is also a major energy exporter to Afghanistan.

According to Dogharoun Customs Department Director General Mohammad Kuh-Gerda, Iran’s export of liquefied natural gas (LNG) to Afghanistan from the border crossing of Dogharoun quadrupled in the first five months of the current Iranian year on March 21

Iran exported 44,929 tons of LNG to Afghanistan during the same period of last year, he added.

Ten trucks load Iran’s LNG at Dogharoun Customs Department daily, before heading for Afghanistan, according to the official.

Eighty percent of the exported energy are made up of raffinate and liquefied petroleum gas (LPG).

All of Iran’s energy exports to Herat in Afghanistan are made through Dogharoun Customs Department.

More than 145,000 tons of LNG was loaded onto trucks and dispatched to Afghanistan from Dogharoun in the last Iranian year [ended March 20, 2019].

“Dogharoun Customs Department’s capacity is 350,000 tons of LNG exports, that’s why we have installed the most modern facilities there,” Kuh-Gerda has been quoted as saying.

In August, a senior energy delegation from Iran visited Kabul to further increase energy cooperation between the two countries and discuss power supply to Afghanistan.

Iran is the main energy supplier of Afghanistan, providing the poor neighboring country with electricity, oil, oil products and gas. Due to Kabul’s heavy dependence on energy supplies from Iran, the US is unable to influence cross-border interactions and trade between the two countries.

Trade Figures

Latest data provided by the Islamic Republic of Iran Customs Administration show Iran’s exports to Afghanistan reached $1.07 billion during the first half of the current Iranian year (March 21-Sept. 22). The neighbor to the east accounted for 5.13% of Iran’s total exports during the period.

Last year's (March 2018-19) data show Afghanistan was Iran’s third biggest export destination, after Iraq and the UAE, among neighbors and fourth in the world, as Iran exported 5.67 million tons worth $2.92 billion to Afghanistan during the 12-month period, down by 4.18% in tonnage and up by 5.11% in value YOY.

Iran mainly exported low-density oils, iron/steel bars and floorings to Afghanistan.

Imports stood at a meager $10.93 million.