Iran's mineral exports "have decreased by 40 to 100 percent"

According to the vice president of the Iranian Mineral Exporters Association, exports of these materials have decreased sharply in 2019 compared to the previous year. He attributes this to the imposition of 25 percent duties. Some have called these duties an “internal embargo.”

Sajjad Gharghi, a member of the Tehran Chamber of Commerce's Mines Commission, says that Iran's mineral exports have decreased by 40 to 100 percent in various areas in the three months ending in November of this year compared to the same period last year.

The vice president of the Mineral Exporters Association attributed this situation to the recent decision by the Ministry of Industry, Mines and Trade (MIMT) to collect 25 percent duties on exported mineral raw materials.

A 25 percent increase in mineral taxes was announced to the Islamic Republic Customs in September of this year, to be implemented from the beginning of October. ILNA news agency reported on Sunday, November 4, quoting Sajjad Gharghi, that with this decision, mineral exports will face a “terrible decline” in the second half of this year.

The private sector activist said: "The Chamber of Commerce and all mining organizations opposed this decision and stated their opposition in writing and in person in meetings with reasons and evidence, but so far no response has been given to them."

The most important reason for increasing customs duties on minerals is to prevent raw material sales in order to boost production activities and increase employment.

Doubts about achieving the goals of increasing tolls

Gharghi questioned the achievement of these goals and, stating that the increase in taxes will limit investment in this area, said: "The way this 25 percent is collected is also interesting, while tax justice says that taxes and duties should be collected from profits and operations, but this 25 percent is collected from FOB goods, that is, cargo that is on board the ship and ready for export."

Since the US withdrawal from the nuclear deal in May of last year, the Islamic Republic's mineral exports have been subject to sanctions by the US Treasury Department on several occasions. Iran's mining industries are also indirectly affected by some other sanctions.

The most recent sanctions in this area were imposed in January of this year in response to the Revolutionary Guards' missile attack on two bases in Iraq for the United States and its allies.

After these missile attacks, US Treasury Secretary Steven Mnuchin announced that Washington would blacklist Iran's largest metal producers and impose new sanctions on new sectors of the Islamic Republic's economy, including civil engineering, construction, and mining.

The problem of including Iranian companies on the sanctions list

The new sanctions specifically name about twenty companies active in the mining and metals sector of the Islamic Republic. Sajjad Gharghi told the Iran Chamber News Agency on January 11 that since some industries, such as steel, have already been sanctioned, the new sanctions will not have much effect, but the “fundamental problem” is naming and placing the companies on the sanctions list.

He said: "In addition to increasing the costs of commercial transactions, this will also reduce the bargaining power of companies, which will tip the scales more heavily in favor of the buyer."

The deputy chairman of the Mines and Mineral Industries Commission of the Iranian Chamber of Commerce says that, regardless of sanctions, what is hindering the export of minerals is domestic institutions, and while the United States is targeting foreign exchange-generating industries, abolishing export duties on all mineral products is the most important priority for developing exports.

“Domestic boycotters”

On September 14, a few days after announcing the imposition of 25 percent customs duties, Bijan Panahizadeh, deputy director of the Iranian Chamber of Industry, Mines and Trade, called those who, according to him, are hurting the country's economy by preventing the export of minerals "domestic boycotters" in a radio program.

Panahizadeh called the discussion of raw materials sales inaccurate and emphasized that those who use this excuse to prevent mineral exports are hurting the economy and blocking the entry of foreign currency. He added about these individuals: “Not only are these people not helping the system, but they are also fueling sanctions as part of the US Treasury Department.”

Government economic officials had previously set the tax rate on some minerals, such as iron ore, at 8 percent this year. Jafar Sarqini, deputy minister of industry, said the more than three-fold increase in taxes was due to the surge in exports, which had caused domestic steelmaking industries to struggle due to a shortage of raw materials.

Jafar Sarqini says that the "enemy" created many obstacles to prevent Iran's exports of steel and metals, but not only did it not place any restrictions on the export of raw iron ore, but it also sent "countless ships" to the region to transport minerals.

Mohammad Reza Bahraman, head of the Iranian Mining House, noted in an article titled "The Disaster of Sanctions and Self-Sanctions" published in the Donyayeh Eqtesad newspaper on November 29 that Iran faced major economic problems in 2018 due to various reasons, including "incorrect economic measures and factors that exacerbate the effects of these measures, such as foreign sanctions."

"Self-sanctions" are a bigger threat than sanctions.

He writes that the sanctions on Iran's metal industries are aimed at paralyzing the country's economy, which is exacerbated by some sanctions in the areas of maritime transportation and the import of parts and machinery, but "self-sanctions" have faced a greater threat to this industry.

The head of the Mining House wrote in this regard: "Not allowing the export of the country's surplus minerals, which absolutely did not provide the necessary provisions for the activists of this sector in these cases, with justifications such as guaranteeing the return of foreign exchange at preferential prices, preventing the sale of raw materials, domestic needs, and finally determining new duties from October 1, will cause the loss of part of the Iranian mineral market."

Bahraman believes that the imposition of new duties starting from October 1, although it was done with the intention of maximizing added value in the mineral production chain, it will actually cause the "Iranian market for these minerals" to disappear and be handed over to competitors.

The United States considers one of the goals of sanctions against the Islamic Republic to be reducing Iran's foreign exchange earnings because it believes that part of these earnings are spent on supporting proxy groups in the region and organizations such as the Palestinian group Hamas and the Lebanese Hezbollah, which Washington has listed as terrorist organizations.

In May of this year, on the first anniversary of the withdrawal from the nuclear deal, US President Donald Trump announced the imposition of new sanctions, including on the metal and mining industries, and said that about 10 percent of the Islamic Republic's foreign exchange resources are provided through exports in this area. Accordingly, foreign exchange earnings from this sector are expected to face a sharper decline, similar to oil revenues.

Source: DW