Iran's Non-Oil Foreign Trade at $72b

EghtesadOnline: Iran’s non-oil foreign trade during ten months to January 20 reached $72 billion, according to Mehdi Mirashrafi, head of Islamic Republic of Iran Customs Administration.

News ID: ۷۴۹۵۶۹

28 January 2020

Exports were put at 115 million tons and valued at $35.5 billion, indicating 20.76% growth in volume but 3% decline in value compared to the same period last year, according to Financial Tribune.

Imports reached 28 million tons worth $36 billion.

"The import tonnage saw 8% growth year-on-year but no change in terms of value," he added.

As such, a $600-million in trade deficit was registered during the period under review.

“China, Iraq, Turkey, the UAE and Afghanistan were Iran’s main export destinations. Exports to China were valued at $8.3 billion, Iraq $8 billion, Turkey  $4.1 billion, the UAE $3.7 billion and Afghanistan  $1.9 billion," the customs chief noted.

“Petrochemicals worth $15.8 billion constituted 44% of total exports while other exports were valued at $19 billion or 56% of the overall export," he was quoted as saying by Mehr News Agency.

Non-oil goods, as per IRICA description, refer to all commodities minus crude oil.  Oil-driven products and by-products plus petrochemicals are also categorized as non-oil.

IRICA categorizes non-oil exports into three sub-groups: petrochemicals, gas condensates and miscellaneous.

Meanwhile, China, the UAE, Turkey, India and Germany were main exporters to Iran. Essential goods accounted for 19 million tons (68%) out of the total 28 million tons of imports, he was quoted as saying by Mehr News Agency.

Also known as necessity goods, essential goods are products and services consumers will buy regardless of changes in income levels.

Mirashrafi added that a total of 66 tons of goods, chiefly nuts and carpet, were exported to the United States during the period while imports from that country, mainly livestock feed and necessity goods, stood at 27,000 tons worth $120 million.

He added that 27,000 billion rials ($200 million) worth of goods smuggled into Iran were confiscated during the ten months compared to last year’s 8,000 billion rials ($59.4 million).

"There are 5,000 cars parked in customs terminals waiting for clearance," he noted.

Recalling that the budget law for the current fiscal year (March 2019-20) has projected 160 trillion rials ($1.18 billion) in customs revenues, the official said IRICA generated 100 trillion rials (more than $743 million) in customs revenues over the ten-month period.

Goods valued at $70 million falling within Group IV and known as “non-essential goods” with domestic counterparts, are lying in the customs due to the ban on their imports last year.

Neighbors in Focus

Amid trade restrictions Iran is facing as a result of the US sanctions, it is focusing attention on exports to neighbors.

The Ministry of Industries, Mining, and Trade has raised the target of exports to its neighboring countries to $48 billion by the fiscal year March 2021-22, the deputy minister, Hossein Modares Khiabani, said.

Iran currently has a 2% share in the neighboring countries' total imports and if the target is realized, this number will rise to 4%.

“Neighbors import goods worth $1.2 trillion (per year) while Iran’s share is  $24 billion,” he rued.

Iran’s exports to its 15 neighbors — the United Arab Emirates, Iraq, Turkey, Afghanistan, Pakistan, Russia, Oman, Azerbaijan, Turkmenistan, Kuwait, Qatar, Kazakhstan, Armenia, Bahrain and Saudi Arabia, have the potential to reach $100 billion a year, he was quoted as saying.

The average value of Iran's exports hovers around $400 per ton while for imports the amount is $1,200 per ton.

“The gap between the average value of export and import of goods indicates that a wrong strategy is in place. In other words, raw materials are exported while processed products are imported instead of importing raw and intermediate goods and exporting processed products with high value added.”

Increasing the average value of exports is and should be possible by processing raw materials, turning them into finished products with high value added, and diversifying exports, he said.

Preferential Trade With EEU

Meanwhile, the ministry is pursuing plans to expand exports to the five member states of the Eurasian Economic Union, namely Russia, Kazakhstan, Armenia, Kyrgyzstan and Belarus.

Iran and EEU signed a three-year provisional agreement in Astana, Kazakhstan in 2018 for the bloc to welcome Iran into EEU.

Iran has three years to negotiate a comprehensive free trade agreement with the Eurasian bloc.

The average tariff set by the union on Iranian goods as part of the agreement is 3.1%, while the figure is 12.9% for EEU exports to Iran.

Iran and EEU have listed 862 types of goods in the provisional agreement, based on which Iran will enjoy easier export terms and lower custom tariffs  on 502 items and the same for 360 items from EEU member states.

“Of the 862 items mentioned in the agreement, 639 are industrial and the remaining 223 are agricultural goods,” the deputy head of Iran Chamber of Commerce, Industries, Mines and Agricultures, Mohammad Reza Karbasi, has been quoted as saying.

Data provided by head of the Trade Promotion Organization of Iran, Hamid Zadboum shows Iran exported $656 million worth of goods to the EEU states during the first nine months of the current fiscal year (March 21-Dec. 21) – 48% more in value compared to last year's corresponding period.

In volume terms, it was 94% higher year-on-year rise

According to the IRICA chief, Iran exported more than $28.2 million worth of commodities to the EEU under the preferential tariffs from October 27, when the agreement came into effect, to November 29.

EEU’s exports to Iran under the preferential trade agreement stood at around $166 million during the same period.

Imports mostly included necessity goods.

Iran’s total exports and imports to and from the five EEU members during the period under review amounted to $137.9 million and $193 million respectively.

The numbers show more than 20% of Iran's export to the EEU and 83% of imports from the bloc were carried out under the trade agreement.

Zadboum added that the growth Iran has experienced in exports to the EEU is the biggest among all regions, including the (Persian) Gulf Cooperation Council, Association of Southeast Asian Nations or the European Economic Union.

The agreement is deemed especially important considering unilateral US economic sanctions against Iran after Donald Trump walked away from the nuclear deal the world powers had signed with Iran in 2015. The sanctions have restricted Iran's foreign trade and harmed its economy, in what Iranian officials have termed "economic war".