Pakistan traders shy away from Iran as sanctions hurt

Published: February 8, 2012

Iranian importers are now finding it much more difficult to settle payments for critical imports. PHOTO: FILE

ISLAMABAD: Payment problems are making Pakistani traders increasingly reluctant to do business with Iran as Western sanctions pile pressure, a Pakistan government official and the country’s rice exporters association said on Wednesday.

While earlier restrictions have made it difficult to trade with Iran, fresh sanctions earlier this year including US ones against Iranian financial institutions and European Union sanctions on crude imports have tightened the noose further.

Iranian importers are now finding it much more difficult to settle payments for critical imports, including food items, officials and traders said.

“They are facing a foreign reserves issue because of sanctions. They don’t want to import too much and reduce their reserves,” Shoaib Anwar, an assistant director at the Trade Development Authority of Pakistan told Reuters.

“This is the outcome of the sanctions, that’s the reason for these issues.”

Iran’s rial has plunged as the sanctions take effect, raising the price of imports for the economy and making it difficult to find Dubai-based middlemen who can process payments to keep the country’s trade flowing.

“We use lines of credit opened through agents in Dubai, but that too has become difficult because of sanctions and the resulting currency fluctuations,” said Javed Agha, chairman of the Rice Exporters Association of Pakistan.

Rice is Pakistan’s biggest export to Iran, almost 60 percent of a total of $161.94 million in the 2010-11 financial year.

Other Pakistan food exports to Iran, like fruits and vegetables, have also been hit by sanctions, Anwar said.

In the first quarter of the current financial year (July to September 2011), Pakistan exported rice worth $17.03 million, down from $22.16 million in the same quarter of the previous year.

Bread and rice dominate the diet of most Iranians, many of whom can no longer afford to buy meat, which now sells for about $30 a kilogram in Tehran.

Bread prices have tripled since December, while rice costs about $5 per kg (2.2 lbs). Iranians earn about $350 a month on average, while officials put the poverty line at $800.

Iran imported 62 percent of its maize, 45 percent of its rice and 59 percent of its sugar in 2010-11, but only 3 percent of its wheat, data from the US Department of Agriculture shows.

Indian exporters said on Tuesday that Iranian buyers had defaulted on $144 million in payments for rice imports, and the All India Rice Exporters’ Association called on members to cease exports to Iran on credit terms.

Iran is facing similar problems with traders in Malaysia, China and Ukraine. Tehran’s crude oil customers are also cutting back on purchases.

Reader Comments (13)

  • Feb 8, 2012 - 9:47PM

    When did sanctions ever work with any country. The only people in these countries who suffer from sanctions are the ones already suffering. These sanctions are only hurting the Iranian people, not the government. Hypocrites are in charge of American money and media, which is very dangerous. Iran is a stable country, with a democracy, and progressive rights for their people. Washington and Israel has been harassing Iran for decades. spend billions attacking Iran today, spend trillions bailing out the bankers tomorrow

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  • Feb 8, 2012 - 10:40PM

    Irans problems are self made. Provocative, threatening statements are issued everyday against western countries and Israel even though they never directly dealt with it. Iran never tried to improve its relations with western countries especially US after dethroning Shah of Iran four decades ago. Countries like Germany, England, France who fought each other in World Wars have become one union, US and Russia which were born enemies are now thick friends. But this Shia country could not come out of its shell, tried to dominate the Arab world expecting a leading role but failed miserably and isolated. History teach lessons, but some are blind to read it.

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  • American
    Feb 8, 2012 - 11:30PM

    Why can’t the Iranian government be more like Turkey, and try and make peace with all countries. Their foreign policy seems to consist of threatening the US and Israel.
    How do the Iranian people benefit from all this war mongering?

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  • Sunny
    Feb 8, 2012 - 11:38PM

    @Sultan Huskot: Was it not Panetta who recently warned Israel it is becoming isolated, was it not Israel who killed innocents peaceful at flotilla, who hold illegal N bombs and threaten others’ even peaceful programs if not Israel, has Iran invaded any country in the last few hundred years, was that not Saddam supported by US and Arabs who invaded Iran and finally who invaded Lebanon in 2006 – please respect the intelligence of ET readers. Recommend

  • Qadir
    Feb 8, 2012 - 11:44PM

    @Sultan Huskot: “US and Russia which were born enemies are now thick friends”???? ha ha ha …… try next time.

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  • Iran
    Feb 8, 2012 - 11:54PM

    you r all blind. you did not see what America is doing, they kill innocent people daily.in this situation our religion Islam did not allow to us to make relation with America and Israel even we loss our life.Recommend

  • CK
    Feb 8, 2012 - 11:54PM

    Take payments in terms of Oil.

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  • Shock Horror
    Feb 9, 2012 - 12:13AM

    @Sunny:
    If Israeli Nuclear Bombs are illegal, what makes Paki Nuclear Bombs legal?

    Recommend

  • hustlerbaby
    Feb 9, 2012 - 12:13AM

    @Iran, no, the quran doesnt say that. A prominent islamic scholar once answered that question in live morning show in a prominent morning show and said that its sinful to stop interaction with a nation. There is alot we can learn from and they from us and dont forget “maybe this USA will one day be islamic or help the muslim world in some ways.” Turkey is a great example. read her history before advent of islam.

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  • Cautious
    Feb 9, 2012 - 1:00AM

    @Colonel

    When did sanctions ever work with any
    country.

    South Africa comes to mind.

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  • Has
    Feb 9, 2012 - 1:42AM

    this is the right time to make money…….

    Irani traders are spread in gulf. either they are Irani Kuwaiti, Qatari Irani or Emirati Irani.

    They would pay in gold to merchandise.

    Even Pakistani Traders can do bater system. good exchange for goods.

    This life time chance to export goods to Iran through Pakistan..
    .let American bark.

    Marc Rich made billions selling Iranian gas and oil to west and Asian…http://en.wikipedia.org/wiki/Marc_RichRecommend

  • Cosmo
    Feb 9, 2012 - 4:22AM

    Muslim brotherhood??

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  • Harry Stone
    Feb 10, 2012 - 5:25AM

    The other day on an article similar to this topic one wise PAK stated it was time to establish a superior Islamic banking system. I could not tell if he was serious or if it was a joke. My thoughts were GO FOR IT.

    Problem solved.

    I am sure it will work out well for PAK just as it will for any other nation that participates

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