Where is Iran's Foreign Trade Heading?

The global trade of any country reflects the internal economic transformations and its relations with the world, as well as the direction of its foreign policy. In the post-JCPOA era, access to oil revenue and improved relations with the European Union were expected to lead to rapid growth in Iran's foreign trade and a transformation in the composition of imported and exported goods and the basket of Iran's trade partners. However, the latest statistics on Iran's global trade do not indicate significant transformation. It appears that several internal and external factors have hindered the rapid expansion of Iran's foreign trade in the post-JCPOA period. After months of delay, the statistics on Iran's global trade for the first four months of this year were published for the first time. Foreign trade statistics are usually updated and published monthly. The Iranian customs and government have not officially announced the reason for the delay in publishing this year's foreign trade statistics. Some government opponents believe that the delay in releasing foreign trade statistics is motivated by a desire to conceal the poor performance of foreign trade during the election and the formation of a new cabinet. According to the latest statistics published by Iran's customs, at the end of the first four months of this year, foreign trade reached over $29 billion with a growth of 6% compared to the same period last year. This figure, however, is not particularly impressive considering Iran's economic capacity and in comparison to pre-sanction statistics and the expectations that existed during the post-JCPOA period. Importantly, while non-oil exports decreased by more than 9%, imports increased by over 23% compared to the same period last year. Therefore, the expansion of Iran's foreign trade has not been achieved through an increase in non-oil exports but rather through imports. This statistic should be analyzed cautiously, as part of the imported goods—estimated to be between $10 to $15 billion—are not included in these statistics. The share of essential goods such as rice, animal corn, and soybeans in imports remains significant and shows no signs of change. According to Iran's customs report, the sharp increase in imports compared to recent years is one of the key points of Iran's global trade developments in the first four months of the year. It seems that importers have taken advantage of the opportunities created in the post-JCPOA period to import machinery, auto parts, and capital goods. This aligns with the statistics showing increased production of domestic vehicles. Another reason for the average value of imports rising is the increase in import prices, estimated at nearly 10%. The increase in imports indicates an increase in Iran's foreign payment capabilities due to rising oil revenues, access to foreign currency resources, and accelerated transactions with exporters. However, a less favorable point—perhaps in the short term—is that the increase in imports has outpaced non-oil exports, causing Iran's trade balance to turn negative during this period, unlike last year. In other words, Iran's economy has seen more goods entering than leaving. If this trade balance deficit results from investment in machinery, it could indicate an increase in domestic production capacity and may lead to a decrease in imports in the medium term. Iran's non-oil exports in the first four months of this year reached just over $13 billion, which is more than a 9% decrease compared to the first four months of last year. An analysis of Iran's export items shows that petrochemical products and gas condensates continue to hold a significant share in Iran's non-oil export basket. The decline in the export of these goods has led to a decrease in the overall export of goods from Iran to the world. If the decline in Iran's exports is limited to these items, it is likely due to seasonal factors, and thus an increase in exports of such items in the coming months is possible. According to Iran's customs statistics, there is no significant change in Iran's trade partner basket. The main exporting countries to Iran in the first four months of this year are, in order of importance, China, the United Arab Emirates, South Korea, Turkey, and India. Iran's importers also remain China, Iraq, the UAE, South Korea, and India. In other words, the basket of Iran's global trade partners has not seen significant transformation, and its composition remains Asian and regional, similar to the sanctions period. Therefore, the foreign trade partner basket indicates Iran's economy's inability to quickly adopt new foreign partners. At the same time, it is likely that international circles, considering the high political risks in Iran, are still reluctant to engage in trade cooperation with Iran. With the increasing disputes between Trump and Iranian government officials regarding the JCPOA, foreign traders and investors are unlikely to rush to enhance trade cooperation with Iran. In conclusion, Iran's foreign trade in the first four months of this solar year does not reflect significant changes in the internal economy and its relations with the world. Even if changes occur in the coming months, they will likely manifest slowly. A combination of internal and external factors explains this slow trend. First, an economy managed in a contractionary manner in such a year adapts slowly to political changes. Second, the slow transformation of Iran's foreign trade direction may also be a result of the resistance of economic institutions linked to military and paramilitary organizations against changes. At the same time, it cannot be denied that despite the government's desire for economic opening to the outside world, the atmosphere of fear regarding Iran still dominates the mindset of many banks, businesses, and international institutions, which serves as an obstacle to Iran's economic opening. The disputes between Trump administration officials and Iranian government officials are other reasons that could lead to a halt in Iran's global trade during the pre-JCPOA period and prevent its expansion.