Iran looks to Pakistan for food deal

Pakistan, one of Asia's largest wheat exporters, shipped nearly 2 million of the total 25.2 million tonnes of wheat it grew last year. Asad Zaidi / Bloomberg News

Iran has held talks with Pakistani officials about bartering iron ore for wheat as it looks for loopholes in global sanctions.

The news comes as Iran struggles to find ways to import food staples needed to feed its 75 million people and control rampant inflation.

"We have offered one million tonnes of wheat to Iran, and in return, Tehran will provide us fertilisers and iron ore," Shafqat Hussain Nagmi, the managing director of the Pakistan Agricultural Storage and Services Corporation, a food security firm part-funded by Pakistan's government, was quoted as saying yesterday by the International News, a news website based in Pakistan.

The two sides will discuss the pricing of the commodities, which both countries are willing to trade under barter arrangement, Mr Nagmi was quoted as saying.

One of Asia's largest wheat producers, Pakistan exported nearly 2 million of the total 25.2 million tonnes of wheat it grew last year.

Iran is increasingly offering to swap its oil, gold and other commodities in return for food to help keep the economy afloat as US and EU sanctions squeeze the country.

A sharp drop in the value of the Iranian rial is making it difficult for buyers in the country to pay for basic goods such as wheat and rice from abroad. As a result, consumers are facing rising food costs. Inflation is tipped to reach 21.8 per cent this year, forecasts the IMF.

"My friends in Iran are telling me prices of basic goods have gone up substantially," said Ali Sowdagar, an Iranian businessman in Dubai.

Iran's plight has worsened since last month after the Society for Worldwide Interbank Financial Telecommunications, based in Belgium, cut off about 30 Iranian banks including the central bank from its global interbank transfer system.

But Iran is finding ways around the situation.

Indian officials have already proposed paying for Iranian oil imports with wheat exports. Further afield, Uruguay said last month it would ask Iran if it could export rice in exchange for oil.

Iran has found other solutions, too.

"If an Iranian trader and its foreign partner hold accounts at the same bank, transfers could be carried out internally," analysts at the Economist Intelligence Unit wrote in a report last month.

"In addition, Iran could conceivably engage a Chinese bank [for example] to serve as its proxy, using payments owed for Iranian oil to purchase imports on Iran's behalf."

Iran has been selling oil in currencies such as Japanese yen, Indian rupees and South Korean won. The downside to such deals is the difficulty Iran faces in repatriating its earnings.

Iran has already been forging closer trading ties with Pakistan in recent months, despite tightening sanctions.

Pakistan signed a deal in January for the purchase of gas from a proposed pipeline that will run from Tehran to Pakistan.

Iran would start sending gas supplies to Pakistan in 2014, senior Iranian energy officials were quoted by Iran's Fars News Agency as saying on Saturday.

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