Despite Government Claims Iran’s Non-Oil Exports Stagnant

Some, like lawmaker Mansoor-Ali Zarei, representing Sari, were still hopeful about the government's success and promised "good things to happen in the next month or two. "However, knowing how limited the government’s capabilities and options are, he said, "If this is not accomplished, we will increase our supervision over the administration."

Others, such as member of parliament (Majles) Rahmatollah Norouzi were so disappointed that said: "The Majles is planning to reduce its cooperation with the government," adding that "The Majles is planning to impeach several of Raisi's cabinet ministers."

Most of the complaints made by both groups were about Raisi and his ministers' broken promises and their inability to solve the country's economic problems. Meanwhile, the spokesman for the parliament's Economic Committee Gholamreza Marhab reiterated that US sanctions on Iran are unprecedented in modern history, and the government should try to improve its performance to compensate for the damage.

While acknowledging that the deadlock over the revival of the 2015 nuclear agreement was a major obstacle to this, like most Iranian politicians, he repeated the formulaic rhetoric that the country's economy should not be tied to the problems resulting from the nuclear issue.

Criticism of Raisi and his cabinet began a few weeks after he assumed office in August 2021 and gained momentum earlier this year, but confidence of even his supporters was shaken when a decision by the government in early May led to a sudden jump in food prices.

Raisi decided to eliminate a key subsidy for food imports, and this led to an across-the-board jump in prices.

An infographic published by Etemad Online website on August 6 indicated that the price of cooking oil has increased by 367 percent in the past year, rice by 200 percent, yogurt by 185 percent, pasta by 168 percent, cheese by 133 percent, butter by 120 percent, eggs by 114 percent, sugar by 102 percent, poultry by 101 percent.

Meanwhile the Tehran Chamber of commerce announced in a new report that meat and rice consumption in Iran has dropped dramatically during the same period.

MP Zarei said it is a shame that Iran has so many economic problems while it owns seven percent of the world's resources and has only one percent of the world population. He added that despite all the economic problems, the members of Raisi's economic team have still not learned to speak in one voice after one year in office.

Norouzi, the lawmaker for Golestan Province also criticized the government for giving a 10 percent pay rise to a small part of workers in Iran while the overall inflation rate in the country is more than 50 percent.

He said, "the Majles has serious criticism of the government's one-year performance, and we expect Raisi to work hard to improve the nation's livelihood."

He added that Iranians are in a very difficult situation and government ministers need to come up with practical plans to solve their problems. He pointed out that costs of housing, meat, dairy products, rice and all other essential commodities have risen dramatically during the one year Raisi and his colleagues were in office.

Norouzi warned that the Majles should put an end to its hesitations and take strict measures against the government if it fails to deliver.

The government’s official news website IRNA published an article Friday with the headline, “Iran’s bargaining power increased by boost to oil production,” claiming that the country can already produce 3.8 million barrels of oil per day.

The claim sounded hollow, as Iran’s oil minister Javad Owji announced in May that his ministry can boost oil production two months after a nuclear deal is reached, hopefully achieving 3.8 million barrels a day capacity.

In recent weeks, as Tehran has been trying to gain more concessions in nuclear talks with the United States, officials have increasingly dangled the prospect of helping Europe in the current energy crisis. They have argued that the only impediment is a lack of political will in Washington, meaning readiness to make concessions.

Even if Iran can produce 3.8 million barrels of crude p/d, its domestic consumption is around 1.7 million barrels, leaving roughly 2 million barrels for export. Currently Iran is shipping around 700-800 thousand barrels p/d, so its additional contribution to world markets would be a little over one million barrels per day.

This addition to world oil supplies can help, but Europe’s more acute need is for natural gas, in which Iran can hardly help despite holding the world’s second largest reserves. The reason is insufficient investments for decades that has led to a fall in production. If a nuclear deal materializes and major Western energy companies enter ventures in Iran to expand gas production, it could potentially export an undetermined quantity to Europe, most probably in liquified form.

But that can take years and can only materialize if a new nuclear agreement holds and no new complications emerge as a result of Iran’s actions in the volatile region.

IRNA’s claims of having achieved a larger production capacity and 40-percent higher revenues in energy exports is also related to Iran’s domestic politics. Economic conditions have seriously deteriorated since President Ebrahim Raisi took office exactly one year ago, and government claims of success in increasing export revenues are meant to take credit amid an avalanche of criticism.

The argument that Iran holds the trump card in the nuclear negotiations even reached the clerics. Tehran’s Friday Prayer Imam, Haj Ali Akbari said in his sermon that “when you need an agreement with us, accept Iran’s conditions and do not make too many demands.” He also warned the West “not to test Iran.”

But in fact, the West can say that economic pressure is on Iran as its annual inflation rate has reached 54 percent and prices for all essential food items have more than doubled in the past 12 months.

A table published by Etemad Online news website in Tehran on Saturday showed cooking oil became 367 percent more expensive since Raisi took office, while price of Rice climbed 200 percent and pasta 168 percent.

Ruhollah Latifi said that the biggest destination for Iran’s gasoline shipments was the United Arab Emirates that purchased 269,000 tons, followed by Afghanistan 59,000 and Iraq with 34,000 tons.

Despite cheap prices Iran is offering the exports seem quite modest due to sanctions by the United States, which create risk of secondary sanctions on buyers and payment difficulties. Iran’s refining capacity is also limited, and its extremely low domestic prices keep consumption high. Lately there has been talk in local media of Iran being forced to import gasoline.

Latifi said that Iran’s shipments were sold between 35-38 US cents per liter (around 94 cents per gallon), while bulk gasoline prices in the Persian Gulf are more than 70 cents per liter. Some observers in Iran have said that in fact gasoline is exported for 27 cents a liter, but Latifi disputed the claim.

Iran is also selling its crude oil at a discount to those willing to risk US sanctions. China is the biggest buyer and pays partly with goods instead of cash.

Latifi also said that the price does not include shipment cost and is a spot price as shipments leave customs. There is also gasoline smuggling from Iran due to low domestic prices but it is hard to quantify it.

The newspaper quoted locals as saying that the repugnant odor of the bodies which are buried under the mud has taken over the area around the Shiite shrine complex of Imamzadeh Davoud, one of the places worst hit by mud and floodwater. Some locals said they have seen many dismembered body parts. 

Shargh claimed the locals had not been warned about the possibility of the flood beforehand, while Sahar Tajbakhsh, the head of the National Meteorological Organization, said in a TV program that the amount of precipitation was not anything new for the area, a valley that has experienced heavier rains with no such floods. She concluded that some construction or development projects must have changed the course of the water, causing the catastrophe. 

According to official figures, as of Wednesday, 95 people are confirmed killed in the floods. More than 20 of Iran’s 31 provinces are affected by heavy rains and floods, with at least 20,000 homes destroyed.

Indian sub-continent summer monsoons usually bring some rain showers to Iran’s arid plateau, but every few decades the impact becomes more intense and causes flooding.

Partly due to the arid nature of the land and partly because of neglect in urban planning, even a modestly strong storm leads to deadly floods in Iran. Many dry riverbeds are choked off with construction or debris dumped by residents, leading to sudden flash floods in places no one expected.

China has been Iran’s top trading partner in recent years and has helped with its overt and covert oil purchases since 2018 when the United States withdrew from nuclear deal known as JCPOA and imposed crippling sanctions on Iran.

The head of Iran-China chamber of commerce in Tehran, Majidreza Hariri told the Iranian Student News Agency (ISNA) in an interview that although China has taken a public stance against US sanctions, “but economic relations have their own characteristics and Iran should have its own special plans for neutralizing sanctions.”

Hariri in the past one year has repeatedly hinted at the economic benefits of lifting US sanctions, without commenting directly on the nuclear talks that have dragged on for 16 months without a result, keeping sanctions on Iran’s oil exports and international banking.

In April, the business leader said that if US sanctions are lifted, annual trade with China could top $60 billion. Last November he warned that Iran’s economy was at a dangerous juncture, with high inflation and a host of other problems. Since then, the national currency has lost more value and inflation has climbed to an annual rate of 54 percent.

Hariri also said that Iran would need eight years once sanctions are lifted to regain the same economic footing it had in 2010, when first international sanctions were imposed for its nuclear program.

Hariri told ISNA, “Despite many slogans, the economy was never a priority for Iran’s economic decision makers, and this has made current conditions so difficult.” He pointed out that while Iran’s oil and petrochemical products in the past had a strong market in China, now it has lost its position to others.

As an example of how sanctions impact ties with China, Hariri said that when a large Chinese operator of ports has 18 ventures in different countries, it cannot risk being targeted by secondary US sanctions. Nevertheless, he added, “China has shown cooperation with Iran for many years.”

Asked if a nuclear agreement is the only salvation for the economy, the businessman said that any agreement needs a 50-50 compromise and talks should continue to fruition, however Iranian officials in charge of the economy should also pursue other avenues to “neutralize sanctions,” to be able to emerge from the current “deadlock”.

Officials, particularly the followers of Supreme Leader Ali Khamenei’s hardline policies, who are currently in charge, often speak of “defeating sanctions” but in essence their efforts have marginal results. Most countries and international corporation shun business with Iran, which for more than a decade has attracted little foreign investment or large joint projects.

Russia on paper has promised many investments, or Iranian officials have claimed, but nothing significant has materialized. Recently, Moscow’s ambassador in Tehran complained that Iran owes Russia more than $700 million.

Iran last year signed a 25-year “strategic cooperation” agreement with China, which includes no specific provision for projects or investments. Officials in Tehran have said that the document is a framework based on which specific deals can be reached, but so far there is no sign of any large Chinese investments that Iran needs.