Following a strong balance of payments performance in 1996-97, mainly due to high oil prices, the period 1997-99 witnessed the deterioration of Iran's external accounts, triggered by tumbling oil prices and stagnant non-oil exports. Imports went down due to the resulting scarcity of foreign exchange, and Iran negotiated re-phasing part of its external debt in 1998 in order to alleviate financial pressure. When oil prices recovered during 1999-2000, and non-oil exports also grew by 9
|Trade (expressed in billions of US$): Iran|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
percent, the Islamic Republic's external position was enhanced considerably. Iran's trade balance had dropped from a surplus of US$2.8 billion in 1996-97 to a deficit of US$4 billion in 1997-98, although this was reversed again into a US$2 billion surplus in 1999-2000. The International Monetary Fund (IMF) in its 2000 country report on Iran estimated that exports during 1999-2000 totaled US$19.726 billion, while total imports that year amounted to US$13.511 billion. Changes in Iran's external balance are mainly dependent on oil prices. Thus, in 1999-2000, proceeds from crude oil exports rose by 60 percent, despite a decline in the export volume, reflecting the 77 percent increase in the average export price of Iranian crude oil.
Non-oil exports consist mainly of consumer goods (55 percent on average during 1997-2000), followed by raw materials and intermediate goods (about 38 percent). Carpets remain the single most exported Iranian non-oil product. Such exports have declined significantly over the second half of the 1990s, from US$2 billion in 1994 to US$570 million in 1998, which is attributed to competition from low-priced carpet-producing countries. Exports of fresh and dried fruits, at about US$600 million in 1998-99 (of which $416 million came from pistachios alone), have captured a larger share of the total. Chemicals are the most prominent export of raw materials and intermediate goods, hovering at about US$500 million during 1997-2000.
The direction of exports has also remained unchanged since the mid-1990s. While Japan and the United Kingdom are the largest importers of Iranian goods (absorbing about 16 percent and 17 percent of total exports, respectively), Germany and the United Arab Emirates (UAE) are the main destinations for non-oil exports, capturing 13 percent and 16 percent of these exports, respectively. Other important destinations for Iranian exports are Italy (6 percent of non-oil exports and 9 percent of total exports), Greece and South Korea (5 percent of total exports), and Turkey (5 percent of non-oil exports).
Iran imports mainly raw materials and intermediate and capital goods . Imports of consumer goods, at about US$2 billion per year, represent only 14 percent of total imports. Imports of machinery and tools average about US$4-5 billion, which cover the bulk of capital goods imports. Iran's imports of grains and derivatives fell drastically in 1998-99 from about US$1.8 billion the previous years to below US$900 million. Iran also imports a large quantity of chemical products, totaling about US$1.8-2 billion per annum. The most important sources of Iranian imports are Germany (12 percent), Japan (7 percent), and Italy (6 percent).
Since Iran's first application to join the World Trade Organization (WTO) in 1996, it has been constantly blocked by the United States. The application was blocked again in May of 2001, but the administration of U.S. President George W. Bush is thought to be considering dropping its objection now that Egypt has sponsored Iran's application. Iran is a founding member of the Asian Clearing Union (ACU), established in 1974 to provide a mechanism for the settlement of transactions among countries in the Asia-Pacific region. Members are Bangladesh, Burma, India, Nepal, Pakistan, Sri Lanka, and Bhutan. Iran undertakes only about 3 percent of its total trade within the ACU, with Bangladesh, India, Pakistan, and Sri Lanka importing oil and oil products, handicrafts, and machinery equipment. Iran's imports from these countries include machinery, spare parts, and spices from India, jute from Bangladesh, and rice and cotton from Pakistan.