Sanctions on Iran: Iranians face shortages of rice, corn, and cooking oil

More evidence is emerging of the crippling impact of new sanctions on Iran, with international traders saying Tehran is having trouble buying rice, cooking oil and other staples to feed its 74 million people weeks before an election.

New US financial sanctions imposed since the beginning of this year to punish Tehran over its nuclear program are playing havoc with Iran's ability to buy imports and receive payment for its oil exports, commodities traders said.

Iran denies that sanctions are causing serious harm to its economy, but Reuters investigations in recent days with commodities traders around the globe show serious disruptions to its imports. That is having a real impact on the streets of Iran, where prices for basic foodstuffs are soaring.

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South Korean President Lee Myung-bak was in Saudi Arabia on Tuesday, the latest leader of a major Asian oil importing country to visit the Middle East seeking alternative sources of oil as sanctions make it more difficult to import from Iran.

Traders in Asia told Reuters on Tuesday that Malaysian exporters of palm oil - the source of half of Iran's consumption of a food staple used to make margarine and confectionary - had halted sales to Iran because they could not get paid.

That followed news on Monday that Iran had defaulted on payments for rice from top supplier India, and news last week that Ukrainian shipments of maize had been cut nearly in half.

Rice is one of the main staples of the Iranian diet. With the rial currency plummeting, prices have more than doubled to $5 a kilo at bazaars in Iran from about $2 last year.

Maize is used primarily as animal feed, and the cost of meat has almost tripled to about $30 a kilo, beyond the budget of many middle class Iranian families.

The measures have had a dramatic impact on daily life in the country ahead of a March 2 parliamentary election that will pit supporters of hardline President Mahmoud Ahmadinejad against opponents seen as even more conservative.

Reformists are barely represented in the election, which is being seen as a referendum on Ahmadinejad's economic policies that have seen subsidies for basic goods cut and replaced with direct payments to families.

Next month's election will be Iran's first since a presidential vote in 2009, when a disputed victory for Ahmadinejad triggered eight months of violent protests. The authorities put that revolt down by force, but since then the Arab Spring has shown the vulnerability of governments in the region to popular anger fuelled by economic hardship.

Traders in Malaysia's capital Kuala Lumpur said palm oil shipments to Iran had largely been halted since late last year, after U.S. and European sanctions made it difficult for buyers to obtain letters of credit and make payments via middlemen in the United Arab Emirates.

"They keep asking in the spirit of Muslim brotherhood. The last I heard was an enquiry for 5,000 tonnes for February or March delivery, but no one wants to take that risk now," said one trader in Kuala Lumpur, speaking on condition of anonymity while discussing commercial contracts.

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