March 26, 2015 | Policy Brief

Iran sanctions relief sparks growing trade with Europe, Asia

The Obama administration insists that the November 2013 interim nuclear deal with Iran provides only “limited” financial relief to the Islamic Republic. A comprehensive assessment of the value of sanctions relief, however, needs to look at the totality of the relief – both direct and indirect – to measure the impact of the Joint Plan of Action (JPOA) and the de-escalation of sanctions pressure on Iran's overall economy. Iran went from a severe recession in 2013, where it was four to six months away from a crippling balance of payments crisis, to a modest, albeit fragile, recovery in 2014/2015 as result of the Obama administration's decision to block new sanctions and to provide relief as part of the JPOA.

New figures from the Iranian Customs Administration, indicate a sharp rise in foreign trade since the deal, confirming recent assessments that Iran’s economic benefits from the JPOA are broader than anticipated.

 

Iran's Imports and Exports

 

March 2014 – February 2015

Value (Billion US Dollar)

March 2013 – February 2014

Value (Billion US Dollar)

Change

Percent (%)

Exports 46.3 37.94 22.05
Imports 48.25 42.97 12.3
Balance of Trade -1.95 -5.03  

Non- oil Imports and Exports. The value does not include oil and gas trade but includes gas condensate as non-oil good.

Iran's exports by category of goods 

  March 2014 – February 2015

Value (Billion US Dollar)

March 2013 – February 2014

Value (Billion US Dollar)

Change

Percent (%)

Gas condensate    13.67 9.51 43.76
petrochemical products 13.14 9.97 31.86
other non-oil goods 19.48 18.45 5.56

The interim deal suspended sanctions on Tehran’s petrochemical exports and automotive industry and eased banking restrictions in Europe. Subsequently, Iran’s foreign trade during the first 11 months of the current Persian Year (March 2014 to February 2015) rose 22 percent (not including oil and gas exports), from $37.9 billion to $46.3 billion. During the same period, Iran improved its trade balance, with imports rising 12 percent. Increased exports of gas condensate and petrochemical products were the main factors behind the rise: petrochemical exports increased by 32 percent to $3.17 billion, and gas condensates by 44 percent to $4.2 billion.

In total, Iran’s exports to Europe in the 2014 calendar year increased 48 percent compared with 2013. Moreover, the JPOA has facilitated imports from the EU through a relaxation of the bloc’s banking restrictions, increasing EU authorization thresholds for “non-sanctioned trade” from €40,000 to €400,000. As a result, Iran has better access to European goods, including crucial spare parts for its automotive industry.

Tehran’s main European trade partners are Germany (approximately $2.2 billion) and Switzerland ($2.1 billion). Both countries enjoyed strong commercial relations with Iran prior to the initial implementation of broad-range European sanctions in 2010, and their business communities have consistently lobbied against stronger sanctions. Sanctions relief has thus partially reopened these supply sources for Iran’s manufacturers. 

Iran's top 5 exported products

  March 2014 – February 2015

Value (Billion US Dollar)

March 2013 – February 2014

Value (Billion US Dollar)

Change
Percent (%)
Liquid Propane 2.09 1.14 83.9
Liquid Butane 1.36 0.95 43.2
Methanol 1.35 0.97 39.4
Polyethylene 1.28 0.88 45.3
Bitumen 1.21 1.02 18.1

Top 5 destination countries for Iran's exports

  March 2014 – February 2015
Value (Billion US Dollar)
March 2013 – February 2014
Value (Billion US Dollar)
Change
Percent (%)
China 8.54 6.67 28
Iraq 5.73 5.44 5
U.A.E 3.5 3.29 6
Afghanistan 2.18 2.21 -1
India 2.18 2.29 -5
Others 10.47 8.5 23

Top 5 exporter countries to Iran 

  March 2014 – February 2015
Value (Billion US Dollar)
March 2013 – February 2014
Value (Billion US Dollar)
Change
Percent (%)
China 11.58 8.45 37
U.A.E 11.21 10.01 12
South Korea 3.9 3.34 17
Turkey 3.49 3.23 8
India 3.46 3.74 -7
Others 14.59 14.1 3

While European markets may still be wary of returning imports from the Islamic Republic to pre-sanctions levels, Iran’s figures show that Middle East and Asian markets are not as shy. Iran’s five top exports (liquid propane, liquid butane, methanol, polyethylene, bitumen) are flowing in the largest quantities to five countries on the Asian continent: China, the United Arab Emirates, Iraq, Afghanistan and India. 

 

Iran's Top 5 imported goods

  March 2014 – February 2015
Value (Billion US Dollar)
March 2013 – February 2014
Value (Billion US Dollar)
Change
Percent (%)
Wheat 2.22 1.25 78
Car 1.76 1.1 60
Field corn 1.59 1.3 22
Rice 1.29 2.1 -39
Soybean 1.16 1.63 -29

As we have previously reported, China’s major role in financing Iran’s petrochemical projects could account for the boom in Iran-China trade. Less clear is why countries like Iraq and the UAE, themselves energy sector giants, would seek to purchase Iranian fuel products. It is possible that the figures reflect these Arab countries’ larger role in helping it bypass sanctions. Since 2003, Iran has built a vast network of front companies in Iraq, and its business presence in the UAE dates back to the end of the Iran-Iraq war in 1989.

The data from the Iranian Customs Administration reaffirms, yet again, that the interim nuclear deal has provided Tehran not the “limited” financial relief that Washington contends, but enough of a windfall to help Iran’s sanctions-battered economy get back to its feet.

Emanuele Ottolenghi is a Senior Fellow at the Foundation for Defense of Democracies, where Saeed Ghasseminejad is an Associate Fellow.

Issues:

Iran Iran Sanctions