By Nader Habibi
If the United Nations Security Council agrees on a
comprehensive economic sanction on Iran, the countries that are currently considered
Iran's major trade partners will be
forced to end or severely reduce their trade relations with that country. Doing
so will impose a cost on their expert industries. For the past two decades the
United States has imposed a
partial but broad economic sanction on Iran and as a result the volume of
trade between the two countries is minimal. Advanced European and Asian
countries, on the other hand, have maintained close economic ties with Islamic
Republic of Iran in this period and will have to give up their current share of
Iran import market. Furthermore; the
recent rise in Iran's oil revenues has allowed it to
increase its merchandise imports in the past five years. Total volume of imports
rose by 189% from $13.7 billion in 2000 to an estimated $39.7 billion in 2005.
In 2005 Germany had the largest share of
Iran's export market with $5.67
billion (14.4%). Germany has
indeed been Iran's top trade
partner in the past 15 years but its share diminished from 17.8% of
Iran's total imports in 1990 to 10.5%
in 2000 before rising again in recent years. The second rank among top exporters
to Iran in 2005 belongs to
China with $3.3 billion or (8.3% of
total). China's exports to
Iran have enjoyed the fastest growth
rate in the past five years. Iran's imports from China rose by
360% between 2000 and 2005. The rise of China has been associated with a decline in
Japan's exports to
Iran. In 1990 Japan was the second largest exporter to
Iran with 11.2% of total market but
this share has declined to 3.37% in 2005. Aside from China's inexpensive products, Iran is also buying more from China for
strategic reasons. China is a
member of the U.N Security Council and has repeatedly resisted the
United States' calls for
diplomatic and economic isolation of Iran.
Italy and France are also among major exporters to
Iran. Italy was the third largest exporter to
Iran in 2005 with 7.5% of the
market and France ranked sixth with 6.2%. Unlike
continental Europe, the United
Kingdom has lost a portion of its share of
Iran market in recent years. While it
ranked 4th among top exporters to Iran in 1995
with 5% of the market, it could not make it to top ten in 2005. This is partly
due to the rising diplomatic tensions between the two countries.
Iran has accused the
U.K. of supporting the
separatist militants that have been responsible for several bombings in the oil
rich south-eastern province of Khuzestan. The U.K, on the other hand, has
accused Iran of supporting
the Shiite militias that have attacked its troops in Southern Iraq.
Iran has used its international trade relations for
diplomatic goals in the past and it is likely to continue this policy in the
coming years as the current nuclear crisis continues. In 2005, Iran put severe restrictions on Korean exports
after that country sided with the United
States in an International Atomic Energy Agency (IAEA)
ruling against Iran. A similar implicit boycott was
also imposed on exports of the United Kingdom. In the next two years
Iran's trade with the European Union
(EU) will be highly vulnerable to diplomatic developments. The share of EU in
Iran import market has
increased from 36% in 2000 to 41.7% in 2005 and the Iranian government had hoped
that this steady growth will discourage EU from supporting an economic sanction
against Iran. At the same time the growing
share of Europe in Iran's
merchandise imports has increased Iran's dependency on European
industrial products and machinery.
Iran's manufacturing and industrial
sector will experience a severe short-term recession if the supply of European
exports are cut off. In the longer run Iran can find Chinese substitutes for most of
these European products as long as China does not join the economic sanction against
Iran.
*Top ten exporters to Iran in 2000: Germany (10.45%), Korea (10%), UAE (7.6%), Italy (5.58%), France (5.3%), China (5.2%), Russia (4.6%), Japan (4.17%), Canada (3.25%),
The United Kingdom (3.25%).
*Top ten exporters to Iran in 2005: Germany (14.2%), China (8.3%), Italy (7.51%), UAE (6.8%), Korea (6.42%), France (6.25%), Russia (5.33%), India (3.42%), Brazil (3.41%) and Japan
(3.4%)
The data
presented in this article is reported in Direction of Trade Statistics
(published regularly by the International Monetary Fund). It varies from the
trade statistics of Iran Central Bank.
About the author: Nader Habibi is an economist
with the Middle East department of Global
Insight consulting Firm.
