Iranian Non-oil Exports Booming amid Sanctions

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Night view of Tehran, capital of Iran.
Photo- Night view of Tehran, capital of Iran. Iran non-oil exports worth $22 billion in 8 months, IRNA, Iran’s official state news agency reported. Photo credit: Arash Razzagh Karimi

It is estimated that Iran has exported 22 billion dollars worth of non-oil commodities during the period from Mar 20- Nov 21,despite the sanctions. Einollah Mohammadkhani Ghiasvand, who directs the secretariat of Supreme Council for Non-oil Exports, said the figure does not include gas condensates.Comparing the figure with that of the preceding year, the official said the country witnessed growth in its non-oil exports despite the West’s economic sanctions on Iran.

According to Deputy Head of Iranian Chamber of Commerce, Industries, Mines and Agriculture Mohsen Jalalpour, the non-oil exports has increased by 32 percent in the first seven months this year (Mar 20-Oct 21) compared with the same period last year. The biggest growth was in the industry sector with a 50-percent growth rate valued at $9.4 billion. ‘This amount of (non-oil) export takes place at a time when the country is under the most difficult economic sanctions,’ Jalalpour added. The exports consist of mineral fuels,gas condensates,plastics,fertilizers,chemical products as well as traditional commodities as fruit, nuts and honey. The potential  markets for the Iranian exports are still not clear, but indications of  trade relations came during the D-8,developing countries  conference  in Nigeria. The D-8 consists of Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey.

Budget Planning

The boost in non-oil trade is a welcome news for Iran in planning for its next year’s budget. Iranian President Mahmoud Ahmadinejad had earlier said that Iran plans to decrease the share of oil revenues in its next year state budget.

“As regards the next year budget, we are moving to decrease the share of oil revenues to a  minimum as much as possible. An oil-based budget is not reasonable since we are a great and advanced country and will decrease our spending,” Ahmadinejad told reporters on Wednesday. He added that the government has cut a large amount of unnecessary spending and focused on key and necessary spending. Iranian officials hopes that these measures will help help Iranian economy end its dependence on oil revenues.

“Apparently, the government wants to decrease the 1392 (the next Iranian year starting on March 21) state budget’s reliance on oil exports to one million barrels a day,” member of the parliament’s Budget Planning Commission Gholamreza Mesbahi Moqaddam told Fars News Agency.

Effect of US-led Sanctions on Iranian Economy

Since the Iranian Revolution in 1979, Iran has been the target of US economic sanctions, which have increased in scope and severity over time.Iran’s economy has been under a lot of pressure due to the crippling sanctions.It’s an uphill task for the nation, trying to stay afloat the economic turmoil. The main challenges the country is facing currently are:

Unemployment – According to the Iranian Statistical Centre the unemployment rate stood at 12.9 percent for the first three months of the Iranian year that began in March. However, analysts find it impossible to believe the figures and says the country’s inflation rate would be higher than 20 per cent. Trade sanctions have curbed export prospects, making it difficult for Iranian companies to procure raw materials. Furthermore, a plunge in the rial currency, which has been halved in the past one year, has pushed overheads, making it incumbent on Employers to initiate layoffs.

InflationIran’s annual inflation rate hit 24.9 percent in October compared to 24.0 the previous month. Last Thursday the US government declared that its sanctions were hurting  Iran’s economy and inflicting the maximum damage. But at what cost? The plummeting rial reached new lows in October and this has adversely affected exports. The price rise that happens in Iran each day is comparable to that which happens in US in a year! Hyperinflation is crippling Iran’s economy like never before and yet, the government is doing all it can to stay afloat.

Currency depreciation – The value of the Iranian currency has plunged more than 50 per cent against the US dollar so far this year, while most international banks have stopped dealing with their Iranian counterparts. The Rial is now the least wanted currency in world. This loss of demand has happened because, due to sanctions  as there is no legal demand for the Iranian oil it buys.

Last October, U.N. chief Ban Ki-moon in a report told the U.N. General Assembly that the International sanctions on Iran are having “significant” effects on the Iranian people and also appear to be harming humanitarian operations in the country. “The sanctions imposed on the Islamic Republic of Iran have had significant effects on the general population, including an escalation in inflation, a rise in commodities and energy costs, an increase in the rate of unemployment and a shortage of necessary items, including medicine,” Ban said in the report.

Road Map Ahead:

For Iran it’s an everyday struggle defending itself against the economic warfare. It is on a crackdown against  black-market trading in the rial and have curbed currency transactions to authorized dealers at artificially fixed rates. Though the Iranian authorities have slowly started acknowledging  the sanction’s impact on its economy, they see this as an opportunity to wean itself off heavy dependence on oil. The will and resilience of the people and the government, to survive the economic drought at all odds is truly admirable. But how long it will be able to hold up its resistance to fall and crumble under pressure,  remains to be seen. The Non oil Export Boom is a step forward in the right direction.

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