Iran-Russia trade suffers from unstable ruble rate

Business Materials 3 May 2015 16:17 (UTC +04:00)

Tehran, Iran, May 3

By Mehdi Sepahvand - Trend:

After sanctions were imposed on Russia and new agreements were made between Tehran and Moscow, a great market opened to Iranian exporters and good opportunities were created to boost the two countries' mutual trade, Mohammad Lahouti, Vice President of Iran Export Confederation and member of the Tehran Chamber of Commerce told Trend May 3.

The Russian ruble has experienced a sharp fall since sanctions were put in place over the Ukraine crisis. Iran's rial however is more stable now, after President Hassan Rouhani took the office in August 2013.

The Islamic Republic recently launched ruble/rial trade with Russia. Gholam Reza Panahi, the deputy governor for currency affairs of Bank Melli of Iran (BMI) said on April 25 that a mechanism that enables Iranian exporters to transfer payments in rubles from their Russian clients to Iran through the Moscow-based Mir Business Bank has been established.

But, since sanctions on Iran had made it impossible to use the International Banking System on one side, and on the other side the ruble depreciated to one third, Iranian tradesmen lost their risk power in conducting relations with Russian counterparts, Lahouti stated.

"Nevertheless, Iran-Russia trade transactions are in the form of timed payments," the official added, maintaining that this again increases the risk of trade since Iranian tradesmen could not be sure what changes the ruble would undergo from the time they conducted the trade to the time of payment.

According to Lahouti, other reasons for Iran-Russia trade shrinking were a lack of transports line between the two countries , visa problems , banking relations where the opening of a joint Iranian-Russian bank failed , and high customs duties for Iranian goods in Russia's customs services.

This forced Iranian tradesmen to attend the Russian market much less than earlier, Lahouti added.

Iran-Russia trade turnover was about $2.3 billion in pre-sanction period. The Islamic Republic imported $1.76 billion worth of goods from Moscow in 2011, meanwhile the country's exports to Russia accounted for about $500 million.

According to the Iranian Customs Administration, Tehran exported $296 million worth of non-oil goods to Russia last fiscal year (ended on March 20). Iran's imports from Russia stood at $667 million in the same period.

Mehdi Sepahvand is Trend Agency's journalist in Iran, follow him on Twitter: @mehdisepahvand