Californian Farmers Waged 'War' on Iranian Pistachios and Won

The great pistachio war began—unintentionally—fifty years ago. In 1971, the United States changed its tax codes to eliminate loopholes exploited by almond and citrus farmers, “setting off a rush to plant pistachios,” which had been left out of the new rules. One year later, the Shah of Iran mandated that “small packets of protein-rich pistachios be given to schoolchildren as part of a free breakfast program,” reducing Iran’s exports of the nut. Just as American pistachios farms began to “come into serious production,” cultivating trees bred from Iranian cutting brought to California, Iran was thrust into its 1979 revolution.

Eager to win marketshare first in the US and then abroad, Californian pistachio farmers considered the chaotic situation in Iran to be “opportune.” Among them were Stewart and Lynda Resnick, an entrepreneurial couple who had stumbled into pistachio farming as a safe haven from inflation and taxes. But as journalist Yasha Levine and filmmaker Roman Wernham detail in a forthcoming documentary entitled Pistachio Wars, the “shrewd” Resnicks, “quickly realized that there was an opportunity” to be seized in growing the humble pistachio.

The documentary, which just surpassed its initial fundraising goal on Kickstarter, explains how, more than anyone else, the Resnicks have been responsible for both making the pistachio into a ubiquitous snack food in the US while also eating away at Iran’s global marketshare. They have become billionaires in the process.

The Resnicks’ enterprise, The Wonderful Company, is the largest producer of pistachios in the US with annual revenue of around USD 4 billion. The company also produces POM Wonderful, a pomegranate juice, and Fiji Water, a luxury spring water, among other food and beverage products.

Levine first learned of the Resnicks while reporting in what he calls, “Oligarch Valley,” a 450 stretch of irrigated farmland bounded by Silicon Valley in the north and Los Angeles in the south. As the name suggests, Oligarch Valley is home to some of the largest and most lucrative agricultural operations in the US, including 90 percent of the country’s pistachio production. The California pistachio crop was valued at USD 3.6 billion this year.

For Levine, his time driving down Interstate 5 was eye-opening. “When people think of California, people tend to focus on Hollywood or Silicon Valley as the state’s most powerful industries. That’s where they think the action happens. No one thinks about farmers,” Levine says. Yet farmers own the water and the land and “nothing happens in California without those two things. Farmers are in a lot of ways the true power brokers in California.”

Levine’s experience with powerful elites dates back to his time as a journalist chronicling the roaring years in Russia after the fall of the Soviet Union, when rapid privatizations and a bonanza of foreign investment collided to create a new class of oligarchs.

Drawing a comparison between oligarchs in Russia and the US, Levine notes that while there are “differences between the oligarchic power structures,” these details “are almost irrelevant when you consider the root political problem: state policy being crafted by and for the benefit of a tiny elite.”

The idea that pistachio farmers can rise to the political and business elite will not surprise Iranians. Asadollah Asgaroladi, one of Iran’s richest men, built his fortune as Iran’s leading exporter of pistachios and nuts. Former Iranian President Akbar Hashemi Rafsanjani was born to a wealthy family of pistachio farmers in Kerman Province.

Surprising as it may be, American pistachio farmers are no less politically ambitious. Led by the Resnicks, they have sought to bend policy to suit their interests. One of their main efforts, as documented by Levine and Wernham, has been to exert control over water resources, by undermining environmental protections and pushing the Californian government to commoditize water in a marketplace which they can dominate. To achieve this, they have become major political donors. Levine explains that while the Resnicks “cultivate a liberal, progressive image,” notably through their association with celebrity comedian Stephen Colbert, they are “not party purists because business comes first.”

Southern California generally votes democrat, but California’s farmland lies in Republican enclaves, in part because of the Republican candidates are “pro-big business, pro-agriculture and always in favor of projects that direct more water to California farmers,” says Levine. Over the years, the Resnicks have donated to three Republican congressmen: David Valadao, Kevin McCarthy, and Devin Nunes.

All three politicians have been outspoken opponents of the Joint Comprehensive Plan of Action (JCPOA), the nuclear deal which granted Iran sanctions relief. Nunes believed that the JCPOA “open[ed] the door for the IRGC to exploit the global economy to finance the growth of the IRGC’s web of terrorism to every corner of the planet.” Valadao argued that sanctions relief would provide Iran financial resources that would be used to “make the Middle East even less stable and increase the likelihood of war in the region.” McCarthy praised President Trump’s withdrawal from the nuclear deal earlier this year.

The Resnicks have also donated to prominent Washington lobby groups and think tanks which advocate a confrontational stance on Iran, including the American Jewish Committee and the Washington Institute on Near East Policy, where Reza Pahlavi, son of Iran’s deposed Shah, recently gave a speech calling for a policy of regime change.

Over the years, US sanctions on Iran have been good for the Resnicks. As Levine describes, “the US pistachio industry as a whole is very aware that its success has been born out of the sanctions against Iran.” In his travels in Oligarch Valley, Levine met farmers who were “openly angry about diplomatic measures like Obama's Iran nuclear deal.”

Back in 1986, American growers shored their newfound dominance of the domestic market by successfully lobbying for a 300 percent tariff of pistachio imports from Iran. From that point, American growers began to turn their attention to international markets.

The US became the leading exporter of pistachios to the European Union in 2005, before international sanctions on Iran were tightened. In the years since the imposition of sanctions, Iran’s pistachio exports have remained flat, while US exports have since more than doubled.

Trade in pistachios is not subject to US sanctions for non-US persons if they avoid using the US financial system to conduct the trade. But general restrictions in banking and logistics services suppress the ability of Iranian growers to get their products to market. Add to this the aggressive marketing and business development activities spearheaded by The Wonderful Company and it is clear that American growers have an edge over Iranian counterparts, even if the Iranian product is widely considered to have a superior taste.

Can Iran fight back in the pistachio war? Iran continues to be a leading producer and a significant exporter of the beloved nut. A few years of poor harvests in California and some better export promotion by Iranian growers could see Iran claw back some of its lost marketshare, especially in Europe. No doubt, the Resnicks will remain vigilant.

Photo Credit: The Wonderful Company

Delays Hit Iran’s Imports of Soybeans, Maize as Ships Remain Anchored Offshore

The bulk carrier ADA left Santos, Brazil on October 2, laden with 23 tons of maize. The Cypriot ship was charted by Cofco, China’s largest agribusiness firm and a global leader in commodities trading, to deliver its cargo to Iran. On November 8, ADA arrived at the anchorage for Bandar Imam Khomeini, located about 75 kilometers offshore. It has spent the last 32 days anchored in the same position and has not yet unloaded its important cargo.

ADA is just one of more than a dozen cargo ships carrying agricultural commodities that are spending weeks anchored off the coast of Iran as importers are delayed in making payments. With supplies of soybeans and maize restricted and demurrage costs incurred when cargoes do finally make it to shore, the delays are having a significant impact on Iran’s economy. Higher input costs are not only pushing up the price of meat and manufactured foods, but also exacerbating other pressures that risk pushing companies, such as poultry farms, into bankruptcy, threatening tens of thousands of jobs.

Global trading companies like Bunge, Cargill, and Cofco, which maintain significant business in Iran, typically dispatch their cargoes prior to receiving payment. Payment is received while the cargoes are en route and the vessel is then able to proceed to its destination port and unload.

Iranian importers and foreign exporters alike describe the recent delays as unprecedented, citing two main challenges. First, the Central Bank of Iran is struggling to allocate foreign exchange to importers in a timely manner as it continues to workout kinks in its recently implemented NIMA system, a centralized foreign exchange marketplace.

Some Iranian exporters, particularly major petrochemical companies, have proven reluctant to make their foreign exchange revenues available through the NIMA system as legally required, limiting supply. As a result, foreign exchange prices available through NIMA, which have averaged at around IRR 100,000 to the dollar in the past few weeks, are higher than what many importers consider fair, limiting uptake of the NIMA system.

As reported by Maziar Motamedi for Al Monitor, importers have “reached an agreement with the government to offer their hard currency revenues at an agreed a further subsidized rate of about IRR 80,000 to the dollar” forcing the Central Bank of Iran to essentially undercut its own marketplace. Unwilling to buy foreign exchange at the market price available via NIMA “buyers prefer to wait in long queues—sometimes taking up to three months—to receive their currencies at the subsidized rate,” according to Pedram Soltani, vice president of the Iran Chamber of Commerce, a private sector body.

It appears these added pressures are making it more difficult for the Central Bank of Iran to meet the needs of Iranian importers of essential goods such as agricultural commodities and pharmaceutical products, who are entitled to receive the lowest subsidized rate of IRR 42,000 per dollar.

In addition to these internal challenges, the Trump administration’s avowed “financial war” on Iran has made even routine banking more difficult. Despite long-standing exemptions for humanitarian trade, the reimposition of secondary sanctions has served to restrict the financial channels necessary to make payments. Even when foreign exchange is made available to importers, there are now fewer beneficiary banks in Europe and Asia willing to accept transfers from Iranian commercial banks. As a result, traders are often finding it necessary to identify new banking channels through which to conduct trades, adding to delays.

The delays are so significant that it appears some ships are being diverted to new destinations following payment delays. The bulk cargo vessel ANTHEA departed from Santos, Brazil on September 30 having been charted by commodities giant Bunge to deliver a cargo of maize to Bandar Imam Khomeini, the largest of Iran’s ports. But ANTHEA only made it as far as the anchorage point off the coast of Fujairah, United Arab Emirates, spending two days offshore before being diverted to a new destination altogether.

Encouragingly, in most cases, shipments are being completed despite the delays. CHAMPION EBONY successfully reached Iran’s Shahid Rajaee port (formerly Bandar Abbas) on November 18, having been dispatched with a cargo of soybean oil by trading firm Renova Norte. SUMMIT SUCCESS and MACHERAS departed Santos, Brazil laden with Maize in early October. Each ship took about five weeks to arrive at its destination, with SUMMIT SUCCESS offloading at Bandar Iman Khomeini for Cofco and MACHERAS offloading at Chabahar for Bunge.

Moreover, commodities traders continue to dispatch ships. SEALADY departed from a Bunge-owned port in Longview, Washington on November 1 headed to Bandar Imam Khomeini with a cargo of American soybeans.

Traders remain adamant that given the significance of the Iranian market and the resources available to the major commodities traders, financial channels will be established in order to sustain a baseline of trade, notwithstanding the currency issues and the sanctions concerns.

Europe’s planned special purpose vehicle for Iran trade could also prove useful in the area of commodities trade. But further bespoke solutions will add costs that will no doubt be passed on down the supply chain, increasing the cost of foodstuffs above what would have otherwise been expected had Iranian importers been able to make payments using more typical channels.

Photo Credit: Vahid Salemi

Australia's MRC to Spend $2.4 Million on Further Iran Mining Exploration in 2018

Mineral Commodities Limited (MRC), a listed Australian junior mining company, has entered the Iranian market, announcing a series of acquisitions and exploration joint-ventures with an eye to the country’s rich copper, gold, cobalt, and lithium deposits.

In July 2017, MRC established a wholly-owned Iranian subsidiary, Madan Rahjo Kanyab Company. Bahman Rashidi has been appointed country manager and oversees a team based in Tehran.

MRC, which has experience developing projects in Australia and South Africa, is based in Western Australia and is led by brothers Mark and Jospeh Caruso. The company has moved aggressively into the Iranian market with rollout beginning just this year. In a statement, Mark Caruso, the company’s Executive Chairman highlighted Iran’s position as a “a world class  geological and mining jurisdiction” which makes the market attractive “despite global  rhetoric and uncertainty surrounding the lifting of sanctions in Iran.” For MRC, it was important to establish “a first-mover advantage” which has been met with “the willingness of the Iranian Government to support and reinvigorate investment in the mining sector.”

So far, the company has reviewed thirty potential “greenfield” and “brownfield” projects, and has so far executed two deals. The first deal is for Tuzlar, a gold and copper mine near Zanjan, in which MRC will exercise the option to acquire a 73.5% interest via its local subsidiary. Initially, MRC will make a USD 680,000 investment to acquire a 22.8% stake in the mine’s owner, Tuzlar Gold  Mining  and  Industry  Company, with an option to acquire the remaining 50.7% at a price of USD 2.5 million upon further study. Tulzar was one of the deposits first discovered by Anglo American when the global mining giant was exploring the Iranian market nine years ago, prior to the imposition of international sanctions.

MRC’s second deal is for Asbkhan, a copper and gold project located near Tabriz, in which MRC has the right to build a 75% stake in a special purpose vehicle established to develop and operate the mine. The company plans to spend USD 500,000 on further exploration and development work to earn its majority stake in the project pursuant to its recently concluded agreement.

MRC will fund further explorations of the local market from its operational cashflow and has earmarked USD 2.4 million for exploration budget for next year. The company has signed MOUs with the Geological Survey of Iran and Iran Minerals Production & Supply Company (IMPASCO) in order to furnish the data and site-access necessary to conduct further studies.

Iran’s geological resources have been long coveted in the global mining sector, and metallic and mineral deposits rival the country’s oil and gas reserves for overall economic value. Iran boasts 7% of the world’s total proven reserves of metallic and non-metallic deposits, according to BMI Research, a market research firm. World-leading reserves of zinc, copper, and iron ore remain largely unexploited.

Any mining company seeking to develop and operate mines in Iran will need to work with IMIDRO, the state-owned conglomerate that oversees the largely underdeveloped sector. Deputy Minister Mehdi Karbasian, who is Chairman of IMIDRO, has stated that Iran is seeking to attract USD $50 billion in investment in the mining and minerals sector by 2022. A key strategy to achieve this goal is to support privatization in the industry, which many foreign investors consider a precondition.  

The government's ambitious investment target is somewhat mismatched with the fragmented nature of the sector. Most mining in Iran is still conducted at an “artisanal” scale, with local miners extracting from small concessions using limited machinery.

This circumstance, and the absence of the mining giants, offers junior mining companies an opportunity to enter the market and consolidate projects of surprising value. But consolidation at this scale is unlikely to lead to the scale of investment sought in the government's new five-year economic development plan. IMIDRO has been courting the major mining and commodities firms, including Rio Tinto and Glencore, but political risks have largely dissuaded investment thus far. In the meantime, as MRC's market entry demonstrates, it will be the smaller mining firms making the big moves in Iran. 

Photo Credit: Wikicommons