Why has Iran banned gold exports?

Iran Materials 1 November 2012 16:53
Why has Iran banned gold exports?

Dalga Khatinoglu, Trend Agency's Iran News Service Chief/

Iran has prohibited exports of gold bullion, golden coins and gold ornament from the country, without the license issued by country's Central Bank.

With regarding this fact that Iranians yearly gold demand is 300 tons, but only 2 to 2.5 tons of gold is extracted from 12 domestic active mines and according official statistics published by Geological Survey Organization of Iran, the total volume of country's 15 gold mines' reserves roughly reaches to 320 tones equals to only Iran's one year gold demands, the gold storage is vital for Iran.

However, it is just a part of story, showing the reliance of gold demands in Iran on foreign resources. The main reasons of banning gold export are foreign exchanges rate's fluctuations in Iran, difference about triple time in value between official USD rate and it's price in Iran's open market, also sanctioned Iranian government's plan to replace gold with USD in foreign trades.

Iran has banned exporting 52 items of commodity in late October, including gold, silver and platinum. USD rate in Iran has risen from 18, 500 rials to 32,000 rials since July 2012.

Forex market in Iran

Iran's national currency, rial, has lost 80 percent of its value during last months, but inflation rate, which is around 25 percent, has not risen as much as rial drop in value. Naturally, in this situation, most Iranian traders want to use the opportunity to export more commodities and gain huge benefits.

For instance, one liter of gasoline is sold in Turkey at $2.5, but in Iran is sold at 7000 rials (23 cents). Even Iranians pay for gasoline once they use up a 50-liter monthly allowance to purchase fuel at 4,000 rials (14 cents). This is a strong motivation for smugglers. For legal exporters, the huge benefits story is same. Considering all this, Iranian government fears from facing boosting exports of necessary items for people such as meat, dairy, oil, rice, etc. and shortage of vital commodities in the country.

Huge difference between official, non-official USD rate

A dollar price officially is 12, 260 rials, while that is sold at 32,000 rials in open market and is offered restrictedly at 26,000 rials in Forex Trade Center, established last month by government.

Iran vitally needs gold both as paying tool for imports versus USD and keeping domestic gold market established. Then, the government is keen to import gold and it has provided facilities for gold importers.

However, some gold importers actually attempt to get dollars from government at official price to import gold and after importing the gold, they re-export it, and sell the gained dollars in Iran's open market, where the price for a dollar sometimes rises up to 36,000 rials.

West sanctions on Iran's banking system

Iran, which has been in trouble to get or pay USD and Euro in foreign trade circles because of western sanctions on the banking system, prefers to replace gold with USD as payment tool in foreign trades. Iran has boosted gold bullion import from Turkey, reportedly increased fluctuating between $1.2 billion and about $1.8 billion each month since April.

It is not clear how big are the gold reserves of Iran's Central Bank, but regarding problems to get crude oil revenues through USD and decreasing forex reserves in the country, the vital increase of gold reserves of Central Bank is being done to avoid further falling of national currency.