Iran’s Trade in the Face of Pandemic, Sanctions

EghtesadOnline: Iran’s exports plummeted by up to 47% in the first month of the current fiscal year (March 20-April 19, 2020) on the back of the coronavirus pandemic, Mojtaba Mousavian, a senior official with Trade Promotion Organization of Iran, says.

News ID: ۷۸۶۱۶۹

05 March 2021

However, the country managed to constantly improve exports over 10 months to Jan. 19; figures show a 20% decline in exports and a 15% decrease in imports during the 10-month period compared with the corresponding period of last year. We hope to increase this year’s exports to 80-85% of the level they were last year,” he told the Persian-language daily Iran.

Noting that the negative impact of the pandemic on Iran’s foreign trade is 10%, the official said, “US Sanctions are largely to blame for the slowdown in exports. They were getting tougher by the day since the beginning of last year up until the end of Donald Trump’s term in office; he churned out sanctions against Iranian companies and institutions and those foreign companies which were cooperating with Iran until the last day of his presidency. However, Iran’s economy has survived both the US sanctions and Covid-19.”

Asked about his estimate regarding the decline in exports by the end of the year, Mousavian said, “The decrease in exports will be around 15% by the end of the year [March 19] provided that we manage to export good amount of natural gas. Excluding natural gas exports, the decline in Iran’s current year’s exports will be 20% compared with last year.”

He went on to say that the sharp decline in exports to China in the early months of the year has been moderate to reach -20%.

“China accounts for 25% of Iran’s exports, it is of great significance for Iran’s foreign trade. Like China, Iraq accounts for 25% of Iran’s exports. The decrease in exports to Iraq stands at 14% compared with last year. On the other hand, trade with the UAE, Afghanistan and Kazakhstan improved by 7%, 1% and 1%. Exports to Russia saw 20% growth. Afghanistan accounts for 7% of Iran’s exports; the share has remained unchanged this year posting slight growth.

Noting that reaching new markets is on TPO’s agenda, Mousavian said, “Exports to Singapore have increased by 2,200%. The agreement with the Eurasian Economic Union provided a buffer against further decline in exports this year. It helped improve Iran’s exports to Belarus, Russia and Kazakhstan. Among the neighboring countries, Iran has no economic exchanges with Bahrain and Saudi Arabia. All in all, our best performance in exports was registered with Russia and the UAE. Exports to the UAE reached $3.7 billion compared with last year’s $3.5 billion.”

“Iran’s exports to Pakistan reduced by 13% during 10 months to Jan. 19 to reach $810 million. The prolonged closure of border crossings with Pakistan including the 72-day closure of Mirjaveh Border in Sistan-Baluchestan is the main reason behind the fall. The 40% drop in exports to India is being compensated; latest numbers suggest that during 10 months to Jan. 19, exports to India decreased by 27% year-on-year. Turkmenistan closed its borders with Iran for more than three months. Even now, Iranian truckers are not allowed to cross Turkmenistan to reach Central Asia. Commodities must be transported there via rail or at the border.

“Iraq borders were closed for 1-1.5 months and then some of them were opened for limited hours, only to puzzle traders and economic operators. Exports to Afghanistan improved by one percent to hit $1.9 billion in 10 months. Border crossings with Afghanistan were closed for no more than a couple of days. World Health Organization’s failure to provide explicit health guidelines in the face of coronavirus contributed to the decline in our exports to the neighboring country as well,” he concluded.

“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," Majid Reza Hariri, the chairman of Iran-China Chamber of Commerce was quoted as saying recently.

“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 necessity goods, pharmaceuticals and medical equipment need to be imported. Given the restrictions placed on oil sales, this figure seems to be unreachable, he said.

30% Decline in Export Value Expected

Iran has to prepare for a 30% decline in its export value in the current Iranian year (March 2010-21) compared with last year due to the impacts of the spread of the novel coronavirus on national and international trade, member of Iran Chamber of Commerce, Industries, Mines and Agriculture board of directors, Pedram Soltani has said.

“Under the current circumstances it is estimated that that the country’s exports will fall between $10 billion and $12 billion compared with last year. The main products that will experience a plunge due to the pandemic are petrochemicals, steel, mineral products, tile and ceramics and nuts,” he was quoted by ISNA as saying.

Soltani, former deputy head of ICCIMA, added that China is most likely the least affected economy by the pandemic and since it is Iran’s top trading partner hopes are that exports to this country will remain unaffected.

“Yet, the outbreak of the Covid-19 as well as the nosedive in oil prices will make Iraq, our second biggest export destination, very cautious and we will be facing limitations on the commodities we can export to the neighboring country.”

Soltani added that based on World Trade Organization’s prediction world trade will see between 13% and 32% plunge in 2020 (best and worst case scenario), noting that it is likely that the economic crisis awaiting the world now will be more intense than the one experienced in 2008.

*** Latest Trade Data

Iran’s foreign trade, excluding exports of petroleum, stood at 134 million tons worth $65.5 billion in the 11 months since the beginning of the current fiscal year (March 20, 2020-Feb. 18, 2021).

According to Mehdi Mirashrafi, the head of Islamic Republic of Iran Customs Administration, exports accounted for 103 million tons worth $31.2 billion and imports constituted 30.8 million tons worth $34.3 billion of the overall trade.

When compared with the corresponding period of last year, the exports registered 18% and 19% year-on-year decline in weight and value respectively.

Imports saw respective six percent and 15% decreases in weight and value year-on-year, he was quoted as saying by IRIB News.

The main export destinations were China with 24.5 million tons worth $8.1 billion, Iraq with 23.9 million tons worth $6.8 billion, the UAE with 14 million tons worth $4.1 billion, Turkey with 5.9 million tons worth $2.2 billion, and Afghanistan with 6.4 million tons worth $2.1 billion.

“These five countries imported an aggregate of $23.4 billion worth of non-oil goods from Iran, which accounts for 72% of the weight and 75% of the value of Iran’s overall exports over the 11-month period.”

Iran’s main exported gods included gasoline, natural gas, gas condensates, petrochemicals and pistachio.

Major exporters to Iran were China with 3.2 million tons worth $8.8 billion, the UAE with 4.5 million tons worth $8.4 billion, Turkey with 4.3 million tons worth $3.8 billion, India with 2.1 million tons worth $2 billion and Germany with 1.1 million tons of goods worth $1.7 billion.

“These five countries exported an aggregate of $24.7 billion worth of non-oil goods to Iran, which accounts for 50% of the weight and 72% of the value of Iran’s total imports over the period,” the IRICA chief said.

According to Mirashrafi, imports of 25 items of essential goods accounted for 21.4 million tons worth $11 billion of the total imports.

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

Iran’s foreign trade reached $6.81 billion in the month leading to Feb. 18 compared with $6.73 billion of the preceding month, Rohollah Latifi, the spokesperson of the Islamic Republic of Iran Customs Administration said on Sunday.

One-month (Jan.20-Feb. 18) exports hit $3.13 billion and imports reached $3.68 billion, indicating $55 million in trade deficit for the country. During one month to Jan. 19, Iran had exported $2.95 billion and imported $3.78 billion worth of non-oil goods, he said.

“Top export destinations during the month under review were China with 1.71 million tons of non-oil goods worth $845 million, Iraq with 1.57 million tons worth $477 million, the UAE with 1.16 million tons with $441 million, Afghanistan with 576,000 tons worth $185 million and Turkey with 165,000 tons worth $183 million. Exports to these five countries amounted to 5.18 million tons of non-oil goods worth $2.13 billion. They accounted for 60% of Iran’s total exports in terms of weight and 70% of the country’s overall exports in terms of value,” he was quoted as saying by Fars News Agency.

Iran’s top trading partners in imports were the UAE with 372,000 tons of goods with $1.06 billion, China with 308,000 tons of goods worth $908 million, Turkey with 360,000 tons of goods worth $426 million, Germany with 186,000 tons of goods worth $210 million, and India with 220,000 tons of goods worth $202 million. These five countries exported a total of 1.44 million tons of goods worth $2.8 billion to Iran during the month under review to account for 56% of the country’s overall imports in weight and 76% of its imports in value, he said.