U.S. Sanctions Strand Iran Ships Ferrying Corn From Brazil

By Tatiana Freitas, Fabiana Batista, Sabrina Valle and Kevin Varley

U.S. sanctions on Iran are not only reverberating through the oil world, but also the agricultural market in Latin America.

At least two Iranian vessels set to carry Brazilian corn are stranded off the Latin American nation’s coast because they can’t get fuel, according to the port authority at Paranagua, about 450 kilometers (280 miles) south of Sao Paulo. State-controlled oil company Petroleo Brasileiro SA said it won’t supply the ships—which have been floating for over a month—due to the risk of U.S. sanctions.

Brazil’s Supreme Court may decide if the ships can be fueled. In a statement sent to the Supreme Court on Friday night, the attorney general’s office said Petrobras is not obligated to fuel the ships as the company responsible for them is able to buy fuel from others suppliers. In addition, the attorney generalsaid the diplomatic issue involving the matter should prevail over private interests.

Iran was the main destination of the country’s corn in the past year, with imports totaling 6 million metric tons, according to government data.

The uncertainty surrounding the fate of the vessels is the latest evidence of how the Trump administration’s policies are rattling commodities markets across the globe. The U.S. trade war with China has already led to a shift in trade flows of everything from soybeans to sorghum. Meanwhile, American sanctions aimed at squeezing Iran’s revenue have left some of the biggest oil buyers searching for supplies from elsewhere.

MV Bavand, carrying 48,000 metric tons of corn, should have set off from Paranagua to Iran on June 8, the port authority said in an email. The ship had left Imbituba port, in Brazil’s Santa Catarina state, on May 15 after loading, according to vessel data compiled by Bloomberg.

MV Termeh has been waiting for fuel supply since June 9 to head to Imbituba Port, where it will be loaded with corn and then head to Iran, according to the port authority. It unloaded a cargo in Sao Francisco do Sul Port in Santa Catarina on June 1, data compiled by Bloomberg show.

“If Petrobras loads these ships, it would be subject to the risk of being included” in the U.S. sanctions list, which could result in significant losses for the company, the Brazilian state company said in a statement. “In addition, there’s information that these ships came from Iran loaded with urea, which is subject to U.S. sanctions.”

Reuters reported on the stranded ships on Thursday.

Iran and the U.S. have been at loggerheads since last year, when Donald Trump withdrew the U.S. from a 2015 nuclear agreement with the Islamic Republic he called the “worst deal ever.” In May, the administration refused to extend waivers to eight governments for Iranian oil purchases, ratcheting up the pressure on the country’s already battered economy.

Iran’s willing to meet with U.S. senators to discuss possible ways out of the dispute, the New York Times reported on Thursday. But also said the nation’s escalation of its nuclear enrichment program could be reversed if the U.S. drops sanctions that Trump imposed after withdrawing from the nuclear agreement.

“This is an isolated episode that won’t impact the rest of Brazil exports to Iran,” Jose Augusto de Castro, president of Brazilian Foreign Trade Association said in a phone interview.

Brazil’s exports to Iran total about $2 billion a year, with shipments mostly comprised of commodities like corn, meat and sugar, according to the association known as AEB. The Latin American country frequently receives ships from Iran, and Petrobras provides fuel for the vessels on a regular basis, Castro said.

The restriction only applies to these specific ships hired by a Santa Catarina-based trader as the Iranian company responsible for the vessels is named in the U.S. sanctions list, he said.

“Brazil has no interest in restricting exports to Iran, which has a strong import potential,” Castro said.

The risk involved in hiring sanctioned ships is solely for the Brazilian exporter company, Petrobras said by email.

Photo: FleetMon

Iran Gets a Little Sweet Relief From Oil-Money Headache in India

Sanctioned by the U.S., Iran has found a sweet way to use the cash it is accumulated from trading oil: Purchase sugar from India.

Iran is struggling to spend the rupees it’s made from oil sales to India that are sitting in the south Asian nation’s banks. Meanwhile, sugar stockpiles are stacking up in India after a bumper crop. Now the two have struck a deal that eases each other’s woes—albeit only to some extent.

The Government Trading Corporation of Iran will buy 150,000 tons of raw sugar from Indian mills for delivery in March-April, paying in rupees from escrow accounts held at UCO Bank. Indian sweeteners regain access to an old market, which has been dominated by Brazil, the world’s biggest producer and exporter.

This payment mechanism will allow India, which imports nearly 80 percent of its crude, to comply with the condition that forbids direct fund transfers to Iran for a U.S. waiver from sanctions. It also opens an outlet for India’s swelling sugar reserves as local production exceeds demand for a second consecutive year. The Asia nation, which vies with Brazil as the world’s top sugar producer, is looking to boost exports.

India could potentially sell more commodities to Iran. India imported crude oil worth USD 12.6 billion from the Persian Gulf country last year, while goods sold—such as basmati rice, oilseed meal and tea—were worth only USD 2.9 billion, according to India’s Directorate General of Commercial Intelligence and Statistics.

Photo Credit: DepositPhoto

Iran's Saffron Seeks Global Recognition

The laborers edge their way across a field of bright purple flowers gathering up the world's most expensive spice, a bounty that makes this dusty corner of Iran a crucial part of global cuisine.

The delicate purple leaves of the Crocus sativus plant hold just three or four of the even more delicate red stamen, better known as saffron, that sprouts for just 10 days a year.

These tiny filaments are currently selling in local markets for 90 million rials per kilo—about USD 700 on Iran's volatile exchanges—and perhaps four times higher abroad.  

The government says more than 90 percent of the world's saffron grows from the hard soil in Khorasan province of northeastern Iran—a figure corroborated by France's specialist institute of agriculture and fishing FranceAgriMer—eventually finding its way into Spanish paellas, Indian curries, Swedish saffron buns and much more.

India is a distant second, followed by Greece, Morocco, Azerbaijan, Afghanistan and Spain, according to a FranceAgriMer report in 2013.   

The star producer in Iran is the small town of of Torbat-e Heydariyeh, about 700 kilometers (435 miles) east of Tehran—which accounts for a third of global production, according to FranceAgriMer.  

But poor marketing means Iran has not always won the credit it deserves as the home of saffron, having mostly exported it wholesale to other countries who label it as their own. 

“All the cultivation is done here, but the marketing and sales is done elsewhere," local parliament member Saeid Bastani told AFP. 

"The people of the world should know that all saffron—of any brand in any market in the world—is Iranian whether it says Spain, Italy or Switzerland," he added with just a sprinkle of patriotic exaggeration.

The government is working with local businesses and farmers to fix the problem. 

From his swish new factory on the outskirts of Mashhad, Ali Shariati, CEO of Novin Saffron, sends out around 15 tonnes of high-grade saffron to world markets each year and is spearheading "Made in Iran" efforts. 

It's tricky because the major markets each have their own saffron needs that require specific packaging and branding—Spain wants powder for paella, Britain likes entire threads for Indian cuisine, Sweden likes tiny capsules for seasonal saffron treats.

"We have to keep innovating and adapting so we can compete with the marketing in other countries," said Shariati. 

Drought Migration

Other issues are forcing innovation on the industry—most pressingly, the devastating drought that has hit Iran's dry regions for the past two decades. 

Saffron plants require much less water than many other crops, but the drought is still causing a migration northwards.

"The land being cultivated is gradually moving north, but that means they're moving into wetter regions and that's no good because the quality is better in dry areas," said Amin Rezaee, a farmer in the heart of saffron country—around two hours' drive south of Mashhad. 

Like most farmers, he has been sucking water out of the ground to water his land, but now realizes he must invest in more sophisticated irrigation systems if he wants it to survive. 

"It's a problem that people are irrigating in traditional ways. They must start to invest in modern methods," he said.

At his factory, Shariati said the problem is easily solvable with better education and support for villagers, which could boost Iran's production from 400 to 1,000 tonnes per year. 

The biggest issue for farmers, he recognized, was navigating Iran's nightmarish banking sector, which is notoriously reluctant to lend to small businesses. 

So under a new "fair trade" scheme his firm now organizes loans on farmers' behalf, bulk-buys equipment at cheaper prices, and provides education on farming techniques. 

"We're educating at least 20,000 farmers and we have guaranteed purchases contracts with 4,000," he said. 

"We want them to deliver more organic saffron and improve their lives at the same time."

 ‘Salt, Pepper, Saffron'

The other obstacle is Iran's struggling economy, which has lately seen wild fluctuations in the currency, in part due to US sanctions. 

"The price of bulbs, fertilizer and laborers have all trebled this year, but the price of saffron has only doubled," said Mohamad Jafari, whose family has been selling saffron in the small town of Torbat-e Heydariyeh for half a century. 

That is good for exports, but another blow for Iranians hit by soaring prices. 

Still, most people in the saffron trade remain upbeat. 

International sales have been boosted in the past five years by increasing interest from China, and foodstuffs are protected from US sanctions—making it a priority export for the government. 

"The biggest problem with saffron is that people don't know about saffron," said Shariati. 

“We want them to think 'salt, pepper, saffron'."

Photo Credit: IRNA

French Cattle Farmers' Iran Dreams on Hold as US Sanctions Bite

Multinational companies aren't the only victims of new US sanctions against Tehran: farmers and ranchers in the Normandy region of France hoping to supply Iran with thousands of cattle each year have also seen their path to a huge new market blocked.

The deal with one of Iran's biggest meat processing groups was signed in 2016 after Iran agreed with world powers to curtail its nuclear program in exchange for sanctions relief.

The goal was to supply mainly prized Charolais stock to help "rebuild a high-quality cattle industry" in the Middle East, Nathalie Goulet, a senator from Normandy, told AFP this week.

She said it would have been the first time live animals destined for Iran's meat markets would have been imported since the Islamic revolution of 1979. 

"We were also hoping to eventually export other products" such as cattle feed and processed meat, she said.

A first "test" was carried out last October, with 310 calves arriving in Iran by plane "in very good condition", she said.

But with US President Donald Trump's decision to pull out of the Iran nuclear deal, the project, potentially worth EUR 10 to 15 million, (USD 11-17 million) risks being abandoned.

Under the new sanctions which went into effect on Tuesday, any company doing business with Iran risks being hit with huge fines by Washington.

"Anyone doing business with Iran will NOT be doing business with the United States," Trump tweeted this week.

Analysts have warned it would be nearly impossible to protect exporters from the reach of the "extraterritorial" US measures—even if they do not do business in the US—given the exposure of large banks to the US financial system and dollar transactions.

Goulet said the French banks involved in the cattle project "are now refusing to take Iranian money," while the company insuring the exports had also pulled out.

Herve Morin, president of the Normandy region, said that although the project has been halted, it has not been "abandoned".

"We're waiting for details on the embargo and the European reaction," he said, referring to pledges by European officials to find ways to protect their companies from the US sanctions.

Yet several French companies, including oil giant Total and carmaker PSA, have already halted their operations in Iran.

The Iranians "want to do this deal," Goulet said, adding that she was also searching for financial alternatives.

"Why not bitcoin?" she said.

Photo Credit: Wikicommons