KUALA LUMPUR: Iran is having to pay a premium for basic foodstuffs such as cooking oil, highlighting the increasing strain on Tehran from Western sanctions aimed at its disputed nuclear programme, even though the sanctions don’t cover food.
Wilmar International, the world’s largest listed planter, and Mewah International, a $570m edible oils processor — both listed in Singapore — are driving sales to Iran on long-term contracts, with Middle Eastern trading sources reporting premiums of up to $30 a tonne to the cash benchmark.
Food shipments are not targeted under the sanctions, but the financial squeeze has cut off firms operating in Iran from much of the global banking system and pushed inflation above 30 percent. Oil exports, Iran’s major source of hard currency, have more than halved since 2011.
food Exporters
Food exporters largely shun Iranian deals, with a volatile rial currency deepening risk and foreign banks wary of financing the food trade for fear of reputational damage. A shopkeeper in Tehran said he had put up his price of imported cooking oil by up to 30 percent this month. A 900 millilitre bottle of cooking oil costs around 39,000 rials ($3.18), compared to a 1 litre bottle that sells for $3.10 in Britain and $1.20 in palm oil-producing Malaysia. Another storekeeper said prices had been stable for weeks.
Iran has shifted to Southeast Asian palm oil as sanctions and limited supplies have disrupted imports of soybeans and oil from Argentina. Malaysia, the world’s second-largest palm oil producer, saw exports to Iran jump 60 percent last year to a record 548,603 tonnes — still less than 5 percent of Malaysia’s total exports of about 17 million tonnes.
Wilmar and Mewah dominate the trade with Iran where demand for high-value refined palm olein, used in cooking oil, can reach 500,000-700,000 tonnes a year. Wilmar sells to Saudi Arabian food company Savola, which buys palm oil to feed its edible oil processors in Iran, three Middle Eastern trading sources said. They said Wilmar demands a premium of $20-$30 per tonne to cover potential payment delays and interest charges.
Reuters
