Gold transactions between Turkey and Iran soared over 30 times in March as Iranians are turning to gold for savings and trade amid tightening Western sanctions.
The US and its allies have imposed sanctions on the Islamic Republic in a bid to derail its nuclear programme. The sanctions have started to bite Iran’s energy and banking sectors. The European Union has announced new measures, aimed at strangling Tehran’s foreign earnings, will come into effect from 1 July.
Neighbouring Turkey has emerged as an important channel for trade and diplomacy amid Iran-West politico-economic wrangling.
Data released by Turkey’s Statistics Institute on Thursday suggested gold exports to Iran rose to nine tonnes, worth $480 million, in March, from 286kg a year earlier.
Total gold exports were 11.1 tonnes in March, the highest monthly exports to Iran since records began in 2010.
“It wouldn’t be wrong to say Iran chooses Turkey for gold imports because of embargoes,” said Gokhan Aksu, vice chairman of Istanbul Gold Refinery, one of Turkey’s biggest gold firms.
“Iranians prefer jewels and precious stones to protect the value of their money and escape instability,” he told Reuters.
Trade between Turkey and Iran is politically sensitive as both countries avoid getting themselves caught in the Western sanctions net. One gold company official told Reuters on condition of anonymity that gold could also be in use for trade as sanctions made regular currency transactions harder.
“Some payments may be made in gold because of problems in transferring money to Iran,” the anonymous trader said. “For the most part, I think gold may be replacing money transfers in trade with Iran.”
Turkey has emerged as a major gold producer over the last decade. The country produced 25 tonnes last year, while importing about 80 tonnes. Most of the imported gold was for re-export to unstable neighbours including Syria and Iraq, one gold company executive said.
In February, Iranian state news agency IRNA quoted the head of its gold and jewellery association as saying that Iran’s annual gold consumption was around 300 tonnes.
Dubai is also an important centre for Iranian gold buyers.
Iranian rial has taken a major beating due to uncertainty, dipping as low as 19,000 to the dollar in late March from 12,000 in mid-2011 before recovering to 16,000 earlier this month after Iran agreed to hold talks with US and its allies.
“It’s natural that savings are made in gold in Iran,” Ozgur Altug, chief economist at BGC Partners in Istanbul, said.
Iran and world powers return to negotiating table in Baghdad on 23 May. Western countries accuse Iran of enriching uranium to build atomic bombs, a charge which the Islamic Republic denies. Tehran insists that its nuclear programme is only for civilian purposes.