In March, the United States and the European Union imposed sanctions on Iran in response to its uranium enrichment program. Later that month, Iran was cut off from Swift, the global bank communication network, barring the country from international financial transactions. To keep sales of its main export, crude oil, from crashing, Iran has since begun accepting alternative currencies — including a very large amount of Turkish gold, reports the Turko-file at Eurasianet.
Iran’s desperate measures
Iran has been accepting a range of alternative payment methods in the wake of its exclusion from Swift. The Financial Times’s “beyondbrics” blog reports that the country has also started taking Indian rupees and Chinese yuan (renminbi) in exchange for oil exports, even though the official U.S. sanctions on buyers of Iranian oil started at the beginning of this month.
Crude oil exports are the “economic lifeblood of the country”, according to beyondbrics. Now faced with serious inflation and rising food costs, due partly to internal mismanagement and partly to sanctions, Iran is exceptionally desperate to keep up its oil sales. And Turkey is one of its top five customers.
Iran received three-quarters of the $4.02 billion worth of gold that Turkey exported in the first five months of 2012, according to Turkish Statistics Institute (TurkStat) figures reported in Turkish daily Today’s Zaman.
To put it in another perspective, gold represented 84 percent of trade between the two countries in those months.
Turkey’s Iranian oil imports still down
Most of the gold was purchased by wealthy Iranian families living in Turkey, according to the Zaman’s analysis, who then handed it over to the Central Bank of Iran through third-party transactions.
TurkStat reports that the gold exports were for “non-monetary purpose exportation”, which implies that they were “sent in place of dollars for oil”, according to beyondbrics.
The sharp rise in gold exports from Turkey to Iran hasn’t yet translated into a corresponding oil export rise in the other direction. Although it received a temporary exemption to the U.S. sanctions on Iran, Turkey is still importing less oil from the country than usual.
In recent years, Iran has supplied about 40 percent of Turkey’s oil needs, but Turkey cut back sharply on Iranian oil purchases in June, according to an analysis in Reuters. From last year’s average of 180,000 bbl/d, Turkey imported just 110,000 bbl/d in June. Iran’s overall oil revenues for June 2012 may be just $3.4 billion, half what they were in June 2011.
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