Others pay price of Iranian sanctions

New sanctions against Iran are squeezing the flow of trade, from iron ore to cooking oil - and even aromatic grains of basmati rice that route through the UAE.

Sanctions against Iran are squeezing the flow of trade from other countries, affecting iron ore, cooking oil and even the aromatic basmati rice that are often routed through the Emirates.

This week, Barack Obama, the US president, ordered new sanctions against Iran, requiring the freezing of property and assets tied to its government, central bank and all financial institutions.

The EU, meanwhile, has agreed to ban oil imports from Iran, starting on July 1, while other countries such as China and Malaysia have reduced or halted purchases of iron ore and palm oil, Reuters reported.

"Iran now faces an unprecedented level of pressure due to intensified sanctions applied by the United States and complementary actions by many others around the world," said the US Treasury department in a statement this week.

The sanctions are making it increasingly difficult for Iranian merchants to pay for supplies, as the value of their currency - the rial - falls.

"It's going to push prices up within Iran," said Brian Barriskill, the supply chain director of Al Dahra Agricultural Company in the UAE. "Smaller amounts will be traded because people will not have the same kind of credit available to them."

Many merchants in Iran used to buy rice from India through middlemen in Dubai who often route supplies through the UAE. But experts say many can no longer afford payment terms, a situation that has already led to a US$144 million (Dh528.9m) default for rice suppliers in India, according to Reuters.

"When Iranians want to make payments to Dubai traders, they are not in a position to," Vijay Setia, the president of the All India Rice Exporters Association, told The National. "Money is not coming from Iran to Dubai, so how will Indian suppliers get money from Dubai?"

About 1.2 million tonnes of basmati rice are exported each year from India to the UAE, according to India's rice association. While about 50,000 to 60,000 tonnes of that is consumed in the Emirates, about 1 million tonnes are sent to Iran, with the remainder delivered to other nearby countries.

To some degree, Pakistani traders in the UAE have been relatively sheltered from defaults, said Mr Setia, because the price of their rice climbed after the flood damage to their country's crops. That made India's stock that much more appealing.

Rice suppliers in India have been warned to push for cash payments and avoid a "direct advance", where buyers in Iran get their goods then provide a post-dated cheque that may need to be cashed 90 or 120 days later.

"I've been advising members 'don't do it'," said Mr Setia, who added that his group's members control about 80 per cent of India's basmati exports.

Mr Setia stressed that he was not trying to punish Iranians.

"Unwillingly, people have landed in this situation," he said. "I think food is something no country should be deprived of. There must be some arrangements."

For now, many goods continue to flow into Iran. "Traders are importing to Iran - especially foodstuff and raw materials for the factories," said Hamid Reza Hamidi, the president of the Iranian Business Council in Dubai.

"But whether that is going to be enough to feed the market fully or not, this is a matter for time to decide."

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