Steel sanctions cut deep into Iran’s economy

LONDON — Iranian manufacturers and builders face serious shortages of steel and other metals as a new European Union export ban adds to troubles for an economy already reeling from sanctions on its finances and oil exports.

Report by Reuters

Reliant on imports to make up a shortfall in its own steel production, data shows Iran’s purchases of foreign steel already falling as buyers are being hit by European Union (EU) and United States measures which hinder banks, insurers and others supporting trade with Tehran until Iran agrees to alter its nuclear programme.

Short of major currencies, some Iranian steel buyers have resorted to barter deals. But explicit sanctions imposed by the EU on October 15 on sales of steel, aluminum and other key materials have prompted some traders to halt all sales and Iranian businesses now face rising prices and scarce supply.

Given steel’s central role in the economy, in the skeletons of new buildings or for constructing machinery, disruption to trade in the metal may cause far-reaching damage — exactly the aim of the Western powers who want to prevent Iran developing nuclear weapons and reject its denials that it has any such aim.

“The ban on metals like aluminium and steel recently imposed by the EU has a sort of ‘multiplier’ effect of pushing the Tehran regime into a new cycle of activities to dodge the effect of the sanction, a course which will end up creating new complications and pushing up costs,” said J Peter Pham, a director with US  think-tank the Atlantic Council.

“At the current pace, Iran’s . . . industrial base will be rendered a cripple.”

Newly re-elected, President Barack Obama and his allies have resisted calls, notably in Israel, for military action against Iran’s nuclear industry, but have stepped up economic sanctions to press the clerical leadership into changing diplomatic tack.

Iran has imported up to 10 million metric tons (11,02 million tonnes) of steel annually in recent years, but data from the International Steel Statistics Bureau suggest a declining trend, even before the EU ban. Imports were about four million metric tonnes in the first nine months of 2012, almost a quarter down from the same period last year.

Builders across Iran are suspending construction projects and channelling any spare funds into land purchases or safe-haven assets like gold in a frantic bid to hold onto the value of their wealth rather than take a risk with long-term investments.

“Sanctions have completely crippled all civil projects. Now even the strongest contractors have stopped works,” Farid (49) who runs a major Tehran building firm, said by email.

Like many Iranians, he did not wish his full name to appear in international media to avoid difficulties with officials. 

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