Last Updated: Sun Feb 05, 2012 07:41 am (KSA) 04:41 am (GMT)

Sanctions-hit Iran turns increasingly to Asia for trade

Iran is expected to have exported $100 billion worth of oil and $45 billion of non-oil products over its calendar year, which ends mid-March. (Reuters)
Iran is expected to have exported $100 billion worth of oil and $45 billion of non-oil products over its calendar year, which ends mid-March. (Reuters)

Grappling with U.S. and EU sanctions that have become progressively tougher over the past 18 months, Iran is increasingly turning to Asia -- in particular to China, now its top trading partner.

“Our exchanges with Europe, which used to account for 90 percent of our trade, now represent only 23 to 24 billion of our 200 billion dollars in trade,” President Mahmoud Ahmadinejad said after the EU ratcheted up sanctions on Iran in January.

These sanctions, which aim to pressure Tehran to halt its nuclear activities, “have not shrunk the world for us,” he said.

Iran is expected to have exported $100 billion worth of oil and $45 billion of non-oil products over its calendar year, which ends mid-March. Its total imports over the same period will touch around $55 billion, according to official forecasts.

“The sanctions, like those previously, will let us cut all economic links with the West,” the number two officer in Iran’s elite Revolutionary Guards, General Hossein Salami, said last month. The force is one of the primary targets of the sanctions.

The European Union, which is imposing a boycott of Iranian oil, had been its second biggest importer after China, accounting for around 20 percent of the crude the Islamic republic sells abroad.

Iran exports more than 70 percent of its oil to Asian markets, in particular China, India, Japan and South Korea.

China and India alone buy 40 percent of Iranian oil exports. They are resisting the Western sanctions, saying they will observe only UN measures, not unilateral ones.

Iran-China trade jumped more than 50 percent between 2010 and 2011, to $45 billion. The two countries plan for it to grow further, to $100 billion by 2015.

Exchanges with South Korea grew 61 percent in 2011, to $18.5 billion.

However trade with the United Arab Emirates, a traditional partner that lies just across the Gulf and which has long been a re-exporting hub for European, U.S. and Asian goods to Iran, has slipped as U.S. financial sanctions bite. UAE imports now represent only a third of Iranian imports.

While the U.S. and EU sanctions make it more difficult for Iran to pay for euro- and dollar-denominated goods, and for it to receive petro-dollars, business with Asian customers have an advantage.

“Letters of credit are now being opened in Chinese yuan, Russian rubles, Emirati dirhams, and Turkish lira, which are forcing importers to buy their products in those countries,” said one Iranian businessman on condition of anonymity.

“Western financial sanctions are going to reinforce trade links with Asian countries, Russia and Turkey,” he said.

A European diplomat in Tehran said late last year that “in 1995, when the Americans imposed their unilateral sanctions on Iran, they in fact boosted trade between Iran and Europe.

“Today, with the European sanctions, we are going to give a boost to Asian companies,” he said.

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