Is Iran's Positive Foreign Trade Balance Really Positive?

According to the latest report from Iran's customs, the total value of Iran's foreign trade, consisting of imports and exports, reached 35 billion and 850 million dollars. During this period, Iran's non-oil exports were reported at 19 billion and 108 million dollars, while imports amounted to 16 billion and 709 million dollars. Based on the published statistics from Iran's customs, Iran's trade balance is positive, approximately 2 billion and 400 million dollars. Although this data only pertains to the first five months of the current year and does not cover the entire year, it nonetheless reflects the basic official trend of Iran's foreign trade to some extent. However, the customs statistics do not include a significant portion of Iran's foreign exchanges that occur through smuggling, thus failing to provide a complete picture of Iran's foreign exchanges. Based on this data, Iran's oil exports have experienced nearly a ten percent growth during the post-JCPOA period and in the first five months of the current year. Simultaneously, the country's imports have decreased by nearly 3 percent. These developments are not surprising, and it is natural that with the loosening of international sanctions, facilities for Iran's export and import activities have emerged, leading to somewhat positive consequences for Iran's foreign trade. Although it cannot be denied that the state of Iran's foreign trade has improved under the eleventh government compared to the previous administration, Iran's foreign trade still faces fundamental problems and has a long way to go before reaching an optimal state. The slight improvement achieved during these five months cannot quickly compensate for the significant damages caused by the previous government. Evaluation criteria for foreign trade claim that for the first time in the history of the revolution, under the eleventh government, the country's trade balance has turned positive, but not every positive balance is necessarily positive, and its positive effects are conditional on its conditions and quality. For example, a positive balance achieved at the expense of a severe reduction in imports of machinery and intermediate materials, or the recession of small enterprises, is not positive and will have adverse economic consequences. In the current recession, there is no sign of increased domestic production or the replacement of foreign goods with imported products. On the contrary, with widespread recession, domestic enterprises' demand for machinery and intermediate materials has decreased, and this recession explains part of the reduction in imports. Additionally, the composition of Iran's export goods shows that a significant portion consists of gas condensates and liquefied gas, thus what is termed 'non-oil' exports is not entirely 'non-oil' either. Beyond these two points, merely relying on raw statistics and unanalysed figures to prove the improvement of Iran's trade balance is not convincing, and acceptable indicators must be used to analyze Iran's foreign trade. The first point that can be inferred from the analysis of Iran's positive trade balance is that the positive balance results from the reduction of Iran's import activities in the current conditions, a product of the severe decrease in oil revenues and an import contraction policy. A reduction in imports is considered positive when it results from increased domestic production and self-sufficiency from foreign imports. For this reason, it remains to be seen what the situation will be with increased economic growth and recovery—which usually means an increase in imports in Iran. Furthermore, if we add the enormous amount of smuggled imports, estimated at around 20 billion dollars annually, to the import statistics, will Iran's trade balance still remain positive? Additionally, an increase in 'non-oil' exports will positively affect Iran's internal economic variables only when it is based on the diversity of goods and services. An examination of Iran's export item basket over the past five months shows that the so-called non-oil export basket is still largely the same as before, and its composition has not undergone significant changes. Therefore, the increase in Iran's 'non-oil' exports is not a result of the diversity of export goods and is mainly composed of gas condensates and traditional goods. The composition of imports remains primarily essential consumer goods and includes basic consumer goods. The diversity of international markets and the basket of trading partners is another indicator of growing foreign trade and a condition for a positive and sustainable trade balance. The report from Iran's customs shows no signs of increasing international partners, acquiring new export markets, and finally expanding the diversity of Iran's foreign customer basket. China, the United Arab Emirates, Iraq, Turkey, and South Korea have been Iran's largest export markets in order, and no fundamental change has occurred in Iran's export market basket. Additionally, in the past five months, China, the United Arab Emirates, South Korea, and Turkey have ranked as the top four largest exporters to Iran. Germany, with an approximately 30 percent increase in its exports to Iran compared to the same period last year, has been described as the fifth largest exporter of goods. Therefore, a significant portion of Iran's foreign exchanges is still conducted with six Asian countries, maintaining a regional and Asian shape and lacking the advantage of connections with advanced economies and global competition. Iran shows no fundamental changes in either its imported or exported goods. The shape of Iran's foreign trade reflects its commercial isolation. The only positive point in the recent report from Iran's customs may be the increase in trade exchanges between Iran and Germany, which, if sustained, could be positive. Ultimately, Iran's share and percentage of foreign trade in total global trade also show no significant increase, and it is unlikely to exceed half a percent. Regional and international competitors of Iran have been able to significantly increase their share of global trade in recent years by expanding their global trade, and the slight growth in Iran's foreign trade is not even sufficient to compensate for past losses. In conclusion, although according to the latest report from Iran's customs, non-oil exports have surpassed the country's imports, several questions arise regarding this 'positive balance' of trade. A positive foreign trade balance is considered positive and sustainable when accompanied by the diversity of the export item basket, a global customer basket, increased global competition, and entry into new markets. Furthermore, smuggling of goods and services has not been accounted for in these statistics, and thus, given the astronomical figures of smuggled imports, a comprehensive picture of Iran's global trade is not presented. A positive foreign trade balance is considered positive and sustainable when accompanied by the diversity of the export item basket, a global customer basket, increased global competition, and entry into new markets. Such characteristics can positively affect internal economic variables such as economic growth and employment. Despite these points, since de-escalation is one of the most important prerequisites for expanding global trade for any country, it seems that Iran's global trade has gained a new opportunity for expansion and growth in the post-JCPOA period. However, this opportunity is only usable if another international tension does not replace the previous tensions.