Sanctions Hit Iran's Food Supply But Cargill, Others Break Ranks
Author: alhayat Posted March 27, 2012
Despite the difficulties it has been facing, Iran is exerting maximum efforts to bring in foodstuffs on the list of food products allowed into the country due to international sanctions. Corn, rice and palm oil currently top this list, which is expanding every week. The US and European sanctions have resulted in a decrease in exports of these products to Iranian markets. The sanctions have also directly impacted the Iranian banking system due to external barriers imposed on bank transfers.
The food suppliers to Tehran, where the government supervise the distribution of agricultural products to Iranian markets, have stepped back one by one. They fear the impact that the Western sanctions may have on their international business. The Iranian people — which total 74 million — might find themselves facing disturbing shortages. Swiss experts have noted that Malaysia's exports of palm oil have declined since the beginning of the year. Malaysia is the number-one provider of this raw material, which is used in abundance to prepare food and manufacture cosmetic and cleaning products. It is noteworthy that middlemen in the UAE have stopped bank payments for Malaysian traders.
Iran's complex financial problems continue as the country has found itself unable to pay for the commodities that it does receive. Ukraine cut off its corn exports to Tehran by 50% because of payment. The Indian Rice Exporters Association has advised all Indian traders not to do business with Tehran, as Iran has not yet paid what it owes for prior orders. This is a severe matter, as each Iranian citizen consumes around 40 kilograms of rice per year, half of which is of Indian origin.
In spite of the extreme caution exercised by giant food-production companies in dealing with Iran, certain US companies such as Cargill have remained committed to their commercial relations with Iran, despite the serious risks this represents. These companies continue to provide food products to the government in Tehran on credit, despite the latter’s questionable ability to guarantee future payments. The situation is different when it comes to the Western companies supervising the transport of oil and refined products to and from Iran. Insurance policies on oil containers impose restrictions on these companies that put owners in a precarious situation when dealing with Iranian markets.
It is true that Iran is able to circumvent the ban on oil exports. However, the food-products dilemma will persist, as Iran is unable to purchase these goods due to its inability to pay. Containing the problem may be difficult, particularly since Iranian metal providers have also been facing hurdles that will impact their trade with the outside world, starting with China, which has decided to reduce imports of Iranian metal by 50 percent.
Read More: http://www.al-monitor.com/pulse/business/2012/03/iran-the-sanctions-disrupt-food.html