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

US and European sanctions are preventing Iran from buying enough rice, cooking oil, and other staples, say commodities traders. Prices for food are rising in Iran.

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A margarine factory owner in Iran, who asked not to be identified, said there was a shortage in supply of the oils needed to make margarine that could halt production soon.

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"The way things are going, I predict that over next three to four months our edible oil will run out because of sanctions. It is no longer being imported and Iran itself cannot produce that much."

A Tehran market wholesaler said: "There is a big shortage of margarine in the market, due to drop in imports. What is being sold now is our previous stockpiles."

A default by Iranian buyers on purchases of 200,000 tonnes of Indian rice is potentially more crippling. The average Iranian eats 40 kilos of rice a year, 45 percent of which is imported, according to the U.S. Department of Agriculture. India is the main supplier.

The president of the All India Rice Exporters' Association said it was advising exporters to stop selling rice to Iran with the customary 90 days credit for payment.

"As part of our efforts to minimise losses, we are asking our colleagues to avoid sending rice on credit," Vijay Setia said.

Exporters have also had difficulty in Pakistan, another of Iran's major sources of rice.

Javed Agha, head of the Rice Exporters Association of Pakistan said: "We use lines of credit opened through agents in Dubai, but that too has become difficult because of sanctions and the resulting currency fluctuations."

Iranian buyers normally pay for Indian rice through middlemen in the UAE, but falls in Iran's rial means buyers have trouble covering the cost in hard currency.

HAMMER BLOW

While it is too early to talk of hunger from the rising prices of food in Iran, international organisations are keeping an eye out for a sign of hardship.

Gaelle Stevenier, spokeswoman for the U.N.'s World Food Programme, said the agency was "monitoring" the situation but had no further comment.

The ultimate hammer blow to Iran's economy could come in the next few months if it becomes unable to sell the 2.6 million barrels of oil a day that it is accustomed to exporting, or is forced to offer such steep discounts that its revenue shrivels.

While Iran has a more diverse economy than other big oil exporters in the Gulf, energy exports are still its main source of earnings to buy food and other necessities.

Top oil exporter Saudi Arabia - long a regional rival of Iran - has promised to make up for lost supply for countries that stop buying Iranian crude.

South Korea's Lee became on Tuesday the latest Asian leader to visit Saudi Arabia in search of additional oil supplies to replace possible cuts of oil from Iran. The leaders of Japan and China visited in recent weeks.

"I believe Saudi can play a major role in stabilising the global economy," Lee said in a speech. Korea bought 87 percent of its oil from the Middle East last year, including 9 percent from Iran.

Where Iran is still able to sell oil, it has difficulty getting paid, or exchanging payment from the buyer's domestic currency into dollars so that it can use the money for international trade.

South Korea owes Iran's central bank some $5 billion for crude oil imports, but the money is trapped in the Korean banking system because of U.S. sanctions.

The European Union, which bought about a fifth of Iran's oil exports last year, has announced a total embargo which will take force over the next six months.

China, which also bought about a fifth of Iran's oil last year, is demanding steep discounts to keep doing business with Tehran, and has cut its imports by more than half over the first three months of this year while pressing Iran to cut its price.

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