Iran: Food for Oil Money Fails

Rooz Online

While Iran’s government had announced earlier that it had found a way to exchange its due oil revenue to import the country’s needs and that some companies such as Royal Dutch Shell would be repaying their debt to Iran by providing medicine and food, it was announced earlier this week that the British government has blocked such a deal. At the same time, Mahmoud Ahmadinejad’s administration announced that it would no longer provide government rated foreign exchange for importing medicine.

Last week, Iran’s oil minister Rostam Ghasemi announced a deal with the Royal Dutch Shell oil company through which Iran would receive medicine and food for the oil revenues that Shell owed it. The amount involved exceeds 2.3 billion USD. Shell stopped purchasing Iranian oil last year, following international sanctions against the country but has owed money to Iran which it cannot pay because of the international economic sanctions against Iran. Shell had been searching for a way to pay back its dues to Iran through some mechanism that would not be a violation of the sanctions regime. One route centered on a US agricultural trader Cargill which would supply Iran with grain in return for payment by Shell. But those efforts met US and European opposition and failed.

Since the extensive international oil and banking sanctions by the EU and the US, Iran has been having serious difficulty in receiving payment for its oil sales. Earlier this week, Ahmad Ghalebani had announced that Iran was owed some 4 billion dollars in oil sales which could not be transferred to Iran. But he also announced that arrangements had been made to trade oil for medicine, food and other basic needs. This was prior to the announcement by the British government.

Last year, Asadollah Asghar-Owladi, an influential associate of the Motalefe Islamic party (Islamic Coalition) had told Aseman weekly that the Islamic republic felt the “whip of the sanctions” and that it “had no choice but to give concessions to Russia, China and India to meet its needs. Otherwise, it would have been defeated by the West.”

Iranian officials have presented conflicting images of the impact of sanctions but the minister of industries and trade Mehdi Ghazanfari recently said that Iran’s central bank was no longer in a position to provide all the foreign exchange needs of the country.

With Britain’s blocking of the deal to provide Iran with its needed medicine and food, Ali Poorkaveh, the director general of distribution at the ministry of industries and trade announced that the government had decided not to provide government-rated foreign exchange to importers of medicine. The value of foreign exchange in the open market is almost twice the rate the government provides foreign exchange to specific industries and imports.