Iran's Foreign Trade Hit $24 Billion

EghtesadOnline: Iran’s foreign trade stood at $24.6 billion during the first five months of the current fiscal year (March 20-Aug. 21), of which exports accounted for $10.9 billion and imports constituted $13.7 billion, the head of the Islamic Republic of Iran Customs Administration said.

News ID: ۷۵۰۸۲۳

27 August 2020

Noting that Iran traded more than 51.8 million tons of goods during the period, the official said exports weighed 38 million tons and imports 13.8 million tons.

Compared with the corresponding period of last year (March 21-Aug. 22, 2019), exports and imports register a 38.7% and 22.7% decline in value.

Iran’s foreign trade stood at $35.53 billion during the same period of last year, with exports hovering around $17.8 billion and imports at $17.73 billion.

According to a report by the Persian-language daily Donya-e-Eqtesad, Iran’s exports and imports during the month to Aug. 21 (fifth Iranian month) stood at $2.2 billion and $2.8 billion, respectively.

Exports and imports during the one-month to July 21 stood at $2.33 billion and $3.28 billion.

“Gasoline was the country’s top exported commodity during the first five months of the current year; $1 billion worth of gasoline were exported during the period under review, thanks to a decline in domestic demand and increase in production,” Mirashrafi was quoted as saying by IRNA.

Polyethylene, polyethylene terephthalate, natural gas, liquid propane, other light oils and petroleum products (except gasoline) were other major exported products.

Notably, exports of crude oil have not been taken into account in calculating Iran's export value and volume.

Major Export Destinations

China was Iran’s biggest export destination with 10.8 million tons of non-oil goods imports worth $3 billion during the five-month period to account for 28% of Iran’s total exports.

Mirashrafi said China was followed by Iraq with 7.8 million tons worth $2.4 billion and a share of 22% of Iran’s total exports, the UAE with 5.9 million tons worth $1.55 billion and a 14% share, Afghanistan with 2.6 million tons worth $871 million and an 8% share and Turkey with 1.06 million tons worth $513 million and a 4.7% share from Iran’s total exports.

Top five exporters to Iran were China with 1.33 million tons worth $3.55 billion and a share of 25.9% from Iran’s total imports, the UAE with 1.7 million tons of non-oil goods worth $3.18 billion and a 23% share, Turkey with 2 million tons worth $1.47 billion and a 10.7% share, India with 1.1 million tons of non-oil goods worth $941 million and a 6.8% share and Germany with 548,000 tons of goods worth $661 million and a 4.8% share.

Essential goods made up 9.7 million tons of Iran's total 13.8 million tons of imports. In fact, essential goods, raw materials and machinery constituted 85% of total imports during the five-month period.

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

Amid high inflation and diminished purchasing power, the Iranian government has sought to ensure a steady supply of essential goods at subsidized prices.

Trade Woes in the Time of Coronavirus

Export prices of iron ore, iron ore concentrate and copper declined by 40% in the first quarter of the current year (March 20-June 20), suggesting that Iran's non-oil export earnings won’t exceed $30 billion by March 20, 2021, says Majid Reza Hariri, the chairman of Iran-China Chamber of Commerce.

“Global trade has dropped by 30% following the outbreak of coronavirus and Iran was no exception. Seven countries, including China, Iraq, Afghanistan, the UAE and India account for 75% of our foreign trade. Over 50% of Iran’s non-oil exports are headed to Iraq and China, all indicative of our export vulnerability. Losing one export market leads to disruptions in export equilibrium and consequences for the whole economy,” Hariri was quoted as saying by Fars News Agency.

Natural gas, gas condensates, petrochemicals and unprocessed minerals make up 70% of Iran's exports. Covid-19 has pushed down the demand for and the prices of these exporting items.

“For our production lines to be operational, about $45 billion worth of essential goods, medicines and medical equipment need to be imported. Given the restrictions placed on oil sales, this figure seems to be unreachable,” he added.

Hariri said running a trade deficit is not a new thing for Iran, as the country’s non-oil exports are not large enough to afford the imports that have declined over the past four year.

Asked whether he believes that the new directives by the Central Bank of Iran on export gains repatriation would result in a decline in exports, Hariri said, “State-run companies and semi-governmental corporations affiliated to various foundations account for 80% of non-oil exports. Let's say the private sector has failed to return $8-10 billion of its export earnings to the country; that is an insignificant amount of money to be considered effective in reducing non-oil exports.”

Underlying the necessity of export income repatriation to the country’s business transactions, Hariri said it is better for a country not to have exports at all rather than see export earnings spent on buying smuggled goods, or purchasing homes in Turkey, Canada and European countries.

The CBI said recently it had provided the judiciary with a list of 250 export companies and individuals who had not complied with the forex repatriation rules.

"An estimated 2,386 exporters failed to repatriate €17.7 billion from March 2019 to July 2020. This amount is expected to increase and the CBI is working with the Ministry of Industries, Mining and Trade and the judiciary," Samad Karimi, the head of CBI's Export Department, told Tasnim News Agency.

“Individuals on that list returned €440 million after their names were sent to the judiciary. The CBI has prepared a new list of non-compliant exporters for the judiciary to take necessary legal action.”

Judiciary officials say the CBI should not hesitate when it comes to exposing the identities and names of defaulters.

"Nearly 1,200 cases are still open regarding CBI's list of exporters and 445 people are in custody. We believe that the CBI should change its approach toward illegal operations in the forex market and take lawbreakers to court," without further delay, Mohammad Reza Sahebi Pasandideh, a Tehran deputy prosecutor general, was quoted as saying by the news agency.

The issue of repatriating export earnings has gained relevance after turmoil in the forex market was linked to shortage of currency offered via the Integrated Forex Deals System, locally known as Nima.

Nima is a secondary market developed by the Central Bank of Iran to be used as a venue where companies sell their export earnings at rates lower than the open market. The currencies sold on Nima will help fund imports.

Rates in the secondary market are lower compared to those in the market.

The confusion compelled the central bank to issue an ultimatum to exporters to respect their financial commitments by July 21. Failing to comply would oblige CBI to name and shame the defaulters, the regulator warned.

Export companies have not returned $27.5 billion of their overseas revenue over the past two years, the CBI has reported.

As per the new regulations, exporters must bring back at least 80% of their earnings in “foreign exchange hawala”, and maximum 20% in hard currency. The proceeds must be sold via the secondary forex market to banks and authorized exchange bureaus.