Reuters – Up to five ships carrying grain to Iran have been diverted to new destinations as European sanctions hold up payments and start to hamper staple food supplies to the Islamic Republic, ship tracking data showed on Thursday.
Around 400,000 tonnes of grain has been held up on at least 10 vessels for as long as three weeks outside Iranian ports, trade sources told Reuters.
AIS live vessel tracking on Reuters showed on Thursday up to five vessels had diverted to destinations including Qatar, the United Arab Emirates and Singapore after waiting mainly outside the Bandar Imam Khomeini, one of Iran’s largest grain terminals.
The EU agreed last week to freeze the assets of Iran’s central bank as part of further sanctions aimed at stepping up pressure on Iran’s disputed nuclear programme.
The tougher trade embargo has meant major EU banks have pulled back from financing grain shipments to Iran, a major importer of foodstuffs and animal feed.
“While the primary objective of U.S. and European sanctions was to hit the Iranian regime’s oil revenues, it was not lost on anyone that the targeting of Bank Markazi (Iran’s central bank) would have ripple effects across the country’s economy — including the facility with which Iran can import not just grain, but also other staples like sugar,” said J. Peter Pham, with the Atlantic Council, a U.S. think-tank.
“Given that these food imports only account for about 15 percent of the Iranian market, there is no danger of starvation or other humanitarian catastrophe. But it is gravely inconvenient and will force increasingly unattractive choices on the regime.”
A trade source said at least two vessels carrying an estimated 70,000 tonnes of grain had left for Singapore. AIS tracking showed a further three dry bulk vessels were on their way to the United Arab Emirates and Qatar.
“There is no prohibition on discharging cargoes (in Iran) but they can’t because they have not been paid. Some will be trying to find other buyers now,” the trade source said.
Around eight dry bulk vessels were still anchored off Iranian ports especially Bandar Imam Khomeini, AIS tracking showed on Thursday.
“Tehran will have to devote more and more of its dwindling resources to cover these basic imports,” said Pham.
“It may even have to accept agricultural products from remaining purchasers of its oil like India in lieu of the payments in partially convertible currency as it has been forced to do of late. The net effect is a vicious cycle for the regime of ever diminishing financial liquidity and market flexibility.”
EU governments also agreed last week to an immediate ban on all new contracts to import, buy or transport Iranian crude oil, shutting off its main source of foreign income.
NON-EU BANKS
A sharp decline in the value of Iran’s currency, linked to Western sanctions, has also created payment difficulties.
“The government has made attempts to mask its struggles to provide for the population by handing out cash when it cut subsidies for various essentials and some middle class Iranians seem to really believe they are better off for it,” said Metsa Rahimi, intelligence analyst with Janusian Security Risk Management.
“But for those who already have very little means, the sanctions are of course hurting them more than government officials – and for many the situation really is dire.”
Iran imports around 4.5 million tonnes of grain a year, including about 3.5 million tonnes of corn, the leading world grain for animal feed, according to International Grains Council figures. It ranks among the top 10 global importers of maize.
Payment difficulties caused by EU sanctions have also meant that traders are no longer booking cargoes on Iranian ships to transport grain exports from Ukraine.
Trade sources have said the stranded ships at Iran’s ports were carrying cargoes including milling wheat from Russia and corn and feed wheat from Ukraine.
The delays have meant that sellers of the cargoes have had to pay up to $35,000 a day in costs to ship owners. Trade sources said some sellers were looking at opening credit lines with non-European banks as a means of getting their payments.
“Some buyers are trying to find methods of payment using banks in other countries, Turkey is being mentioned,” a second trade source said.
Another trade source said Russian banks were also being looked at.
“The Iranians are ready to receive the cargoes but the sellers can’t open letters of credit. Some might be turning to Russian banks as there is no issue with Iran there. The whole thing is a mess,” the trade source said.