Wednesday, 25 April 2012

System D in international trade

Iran: Oil-for-food
Iran's main source of foreign currency, oil, transforms into a source of food. Iranian Oil Minister Rostam Ghasemi said that Iran will barter crude oil and petroleum for essential goods, including food.

24 April, 2012

Iran is forced to conclude barter deals for exported oil after the introduction by the EU, U.S. and UN of economic sanctions aimed at curbing Tehran's nuclear ambitions. Iran is ready to accept payment for oil in gold and even food products instead of dollars.

Thus, Iran is going to get about 200,000 - 400,000 tons of wheat in exchange for oil. The deal will involve a number of trading partners of Iran. Also, settling will be made by supplies of palm oil, rice, corn, and Indian tea.

The main export partners of Iran in 2010 were China (17.1 percent), Japan (10.4 percent), India (10.4 percent) and Turkey (7.2 percent).

But despite the finding of an alternative method of payment for oil, Iran will lose a lot of economically trading partners. The EU and the U.S. continue to increase pressure on Asian countries, including China, Japan and South Korea, insisting that they should stop importing Iranian oil. Under this pressure, many countries - the major buyers of Iranian oil even if do not plan to give up, nevertheless intend to reduce the purchase of Iran's black gold.

As a result, in the first quarter of this year, Japan, South Korea and China reduced purchases by 22 percent. India, which is the second (after China) largest importer of Iranian oil, the daily supply to which is more than 300,000 barrels, which covers about 11 percent of the country's needs in this resource, also plans to reduce deliveries from 20 to 14 million tons of oil.

Above all, Iran is losing in the quality of the food. In fact, compelled to agree on barter of exported oil, a favorable atmosphere for business partners is emerging. For example, the Uruguayan rice supply for oil is an effective way to increase the country's rice exports to Iran, without tough international competition, which will allow it to get rid of a large number of low quality rice.

In addition, the imported goods for Iran become more expensive as the national currency devaluates. This, in turn, is due to the difficulty in obtaining money for the supply of oil as foreign companies cannot transfer payments to the accounts of Iranian banks for energy supplies because of sanctions.

Iranian officials have been very unsatisfied last year with the attempts to involve their country in barter transactions, but the need forced Iran to give up their words and start to barter.

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