Despite plans by the government to increase the volume of non-oil exports during the current Iranian year (started March 21), reports indicate that both export and import of non-oil commodities have declined considerably in the first four months of the year compared with the similar period last year.
The latest report released by the Islamic Republic of Iran Customs Administration indicates that non-oil exports (including gas condensates and petrochemicals) dropped by 15.20% over the period to stand at $14 billion, while imports fell 20.18% to $13.8 billion. The figures are far from impressive, especially considering that government authorities have set a goal of boosting non-oil exports at $60 billion this Iranian year, from nearly $50 billion last year, to compensate the dwindling oil revenues. Head of IRICA, Masoud Karbasian, earlier said the decline in export value is mainly due to the declining global oil prices that have affected the price of gas condensates. The IRCIA report shows a 39.4% decline in the value of gas condensate exports during the four-month period compared with last year’s similar period.
Post-Sanctions Expectations
A board member at Iran Chamber of Commerce, Industries, Mines and Agriculture, Mohammad Lahooti believes a major underlying reason behind the decline in trade volume is to do with traders’ expectations following the nuclear deal between Iran and the world powers. Iran would get access to billions of dollars of its frozen assets once the nuclear deal, reached between Iran and the P5+1 (the five permanent members of the UN Security Council plus Germany) in Vienna on July 14, is implemented. “Iranian traders and businesspeople are worried that the market would experience a shock once the frozen foreign currency assets are unlocked; so they are holding off transactions as they cannot predict the market,” said Lahooti.
Head of Trade Promotion organization of Iran, Valiollah Afkgamirad, also said on Wednesday that purchase orders by Iranian importers dropped 80% in the first four months of the year, adding: “Some manufacturers have postponed their orders for raw material as they are expecting a tsunami of cheap imports once the frozen assets are released.” Meanwhile, he said, many exporters are unwilling to increase their current level of trade as they are anticipating the rial to regain some of its lost value and foreign investors to return after the sanctions fade. He, however, assured traders that the government is aware of the risks and will make due provisions to prevent irregular import of finished products after the sanctions are lifted. “The frozen foreign currency assets are not sufficient to cause a massive inflow of imported products. Moreover, government officials have repeatedly emphasized in their negotiations with foreign delegations that Iran has no intention to increase imports while improving its international economic relations,” Afkhamirad said.
Imprudent Gov’t Decisions
In addition to the speculations about market volatilities, Lahooti also believes that imprudent decisions by the government in the past are responsible for the reduction in the level of exports and causing Iranian traders to lose some neighboring markets to rivals. “In many sectors, wrong decisions and imposing high tariffs on exports led to the Iranian traders losing their share in global markets, he said, citing the example of leather industry where abrupt changes in export tariffs caused many traders to lose interest in the sector.