Iran’s Mineral Material Exports Have Declined “40 to 100 Percent”

According to the vice-chairman of Iran’s Mineral Material Exporters Association, exports of these materials in 2019 declined sharply compared to the previous year. He attributes this to the imposition of a 25 percent tariff. Some have called this tariff an “internal sanction.”

Sejad Gharqi, a member of the Mining Commission of Tehran’s Chamber of Commerce, says Iran’s mineral material exports in the three-month period ending in November 2019 declined by 40 to 100 percent across various sectors compared to the same period in the previous year.

The vice-chairman of the Mineral Material Exporters Association attributes this situation to a recent decision by the Ministry of Industry, Mining and Trade (MIMT) to collect a 25 percent tariff on exported raw mineral materials.

The decision to increase the 25 percent tariff on mineral materials was announced in September 2019 for implementation starting in October by the Islamic Republic’s customs authority. The ILNA news agency reported on Sunday, November 4, that according to Sejad Gharqi, with this decision, mineral material exports in the second half of 2019 would face a “terrible decline.”

This private sector activist said: “The Chamber of Commerce and all mining associations opposed this decision and formally and in face-to-face sessions expressed their opposition with reasoning and evidence, but so far no response has been given to them.”

The most important reason cited for increasing customs tariffs on mineral materials is preventing raw material sales in order to boost production activities and increase employment.

Doubts About Achieving the Goals of Tariff Increases

Gharqi questioned the achievement of these goals and, noting that the tariff increase limits investment in this sector, said: “The manner in which this 25 percent is collected is also interesting, whereas tax justice says that taxes and tariffs should be collected from profits and performance, but this 25 percent is taken from goods FOB, meaning cargo that is on a ship and ready for export.”

Since the United States withdrew from the nuclear deal in April 2018, Iran’s mineral product exports have been subject to sanctions by the U.S. Treasury Department several times. Iran’s mining industries are also indirectly harmed by some other sanctions.

The latest sanctions in this area were applied in December 2019 in response to the Iranian Revolutionary Guard Corps’ missile attack on two U.S. bases and their allies in Iraq.

U.S. Treasury Secretary Steven Mnuchin announced after these missile attacks that Washington had blacklisted Iran’s largest metal producers and imposed new sanctions against new sectors of the Islamic Republic’s economy, including construction and mining.

The Problem of Listing Iranian Companies in Sanctions

In the new sanctions, approximately twenty companies active in Iran’s mining and metals sector were specifically named. Sejad Gharqi said on December 11 to Iran’s Chamber News Agency that since some industries such as steel have already been sanctioned, new sanctions have limited impact, but the “fundamental problem” is the naming and listing of companies in sanctions lists.

He said: “This causes, in addition to increasing the costs of trade transactions, the bargaining power of companies to decline as well, in which case the balance will tip more heavily toward the buyer.”

The vice-chairman of the Iran Chamber’s Mining and Mineral Industries Commission says that apart from sanctions, what the mineral material exports are facing are internal obstacles, and while America has targeted valuable industries, the abolition of export tariffs on all important mineral products is the most important priority for developing exports.

“Internal Sanctioners”

Bijan Panahizadeh, deputy of Iran’s House of Industry, Mining and Trade, on September 15 and a few days after the announcement of the 25 percent customs tariff, in a radio program called those who, according to him, harm the country’s economy by preventing mineral material exports “internal sanctioners.”

Panahizadeh called the raw material sales debate inaccurate and stressed that those who use this excuse to prevent mineral material exports harm the economy and block the entrance of foreign currency. Regarding these individuals, he added: “This group not only does not help the system, but, as part of the U.S. Treasury Department, abets the sanctions.”

Government economic officials had previously set tariff rates for some mineral materials such as iron ore at eight percent for 2019. Jafar Sarqini, deputy minister of industry, attributed the more than threefold increase in these tariffs to the increase in export levels in a manner that domestic steel production industries faced problems due to raw material shortages.

Jafar Sarqini says the “enemy” created many obstacles to prevent Iran’s steel and metal exports, but not only created no restrictions on raw iron ore exports, but sent “countless ships” to transport mineral materials to the region.

MohammadReza Bahraman, head of Iran’s Mining House, in an article titled “The Curse of Sanctions and Self-Sanctioning” published on October 30 in the Economic World newspaper, noted that Iran in 2018 faced major economic problems due to various reasons, including “incorrect economic measures and exacerbating factors of these measures, such as foreign sanctions.”

“Self-Sanctioning,” a Greater Threat Than Sanctions

He writes that sanctions on Iran’s metal industries were aimed at paralyzing the country’s economy, with some sanctions in the maritime shipping and equipment and machinery imports sectors exacerbating it, but “self-sanctioning” has faced this industry with a greater threat.

The head of the Mining House wrote in this regard: “The prohibition of exporting the country’s excess mineral materials, which had absolutely no necessary planning for those in this sector, justified by ensuring currency returns at preferential prices, preventing raw material sales, domestic needs, and ultimately imposing new tariffs from the first of October, will cause part of Iran’s mineral material market to be lost.”

Bahraman believes that the implementation of new tariffs from October 1, although done with the intention of maximizing added value in the mineral material production chain, in practice causes “Iran’s market for these mineral materials” to be lost and handed over to competitors.

The United States cites reducing Iran’s foreign currency revenues as one of the goals of sanctions against the Islamic Republic, as it believes that part of these revenues are spent on supporting proxy groups in the region and organizations such as the Palestinian Hamas group and Lebanon’s Hezbollah, which Washington has placed on its list of terrorist organizations.

Donald Trump, the U.S. president, in April 2019 and on the first anniversary of the withdrawal from the nuclear deal, announced new sanctions, including in the metals and mining industries, and said that about 10 percent of the Islamic Republic’s foreign currency resources are provided through exports in this sector. Based on this, it is expected that this sector’s foreign currency revenues will face a sharper declining trend like oil revenues.

Source: DW