According to reports on May 23rd, Iranian authorities are reviewing documents related to negotiations with the United States and have stated that supplying more Iranian oil to the global market will help stabilize crude oil prices, thereby reducing inflation.
The Chief Deputy President of Iran stated in his speech that since 2018, the United States has prevented Iran from extracting oil at a rate close to its production capacity. Additionally, the U.S. has primarily targeted Iran's ability to sell crude oil and obtain transactions in U.S. dollars within the global banking system, resulting in a nearly 80% reduction in Iran's oil exports over the past few years. Revenues have dropped from $100 billion per year to over $10 billion, and with the added burden of the global public health crisis, Iran has experienced high but controllable inflation.
The Statistical Center of Iran reported on May 23rd that for the month ending on May 21st, Iran's official inflation rate was approximately 39%, a slight decrease from the previous value. However, Iranian economic analyst Saeed Leylaz indicated that the inflation rate should exceed 50%. For instance, the price increase for food and beverages has reached as high as 49%, while the inflation rate for non-food and service categories rose by 2.7% to 43%. The prices of bread, vegetables, meat, rice, and eggs, which are daily necessities for Iranian consumers, have risen significantly, increasing every day.
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In response, according to Iranian media PRESSTV citing Tasnim News Agency on May 22nd, Iran's Trade Ministry (MIMT) operated online system shows that Iran has banned the import of Apple mobile phones. The product has been prevented from registering new orders. A list published by MIMT shows that Apple mobile phones were added to the 27th category of goods overnight, temporarily unable to register orders, in order to restrict the use of foreign exchange resources for unnecessary purposes.
At the same time, for many Iranians, owning a house in the capital Tehran is impossible. In recent months, housing prices in some areas have risen by about 50%, and since 2018, the Iranian currency, the rial, has plummeted more than 70% against the U.S. dollar.
At this critical moment, multiple countries around the world are also helping Iran's economy emerge from its economic predicament through various measures such as oil currency, payment settlement mechanisms, and financing, with new developments in the situation.
In response, several European countries have established new channels for trade payments with Iran. For example, INSTEX is considered an effective way for Europe to bypass SWIFT, a project de-dollarized and handled by some European banks.
Subsequently, an Iranian oil ministry official stated on May 20th that Iran is considering the possibility of exporting natural gas to Europe, but did not disclose specific details, only saying, "No conclusion has been reached yet." Earlier, the CEO of the National Iranian Oil Company said that although Iran's oil exports have decreased over the past two months due to the extremely low discounts on Russian crude oil, the energy price surge triggered by the global crude oil supply chain bottleneck has opened a window for Iran to increase its revenue.
According to Reuters on May 20th, since March of this year, Iran's crude oil exports to the Asian market have decreased significantly as global oil buyers prefer the higher cost-performance ratio of Russian oil. This has resulted in oil tankers carrying nearly 40 million barrels of Iranian crude oil anchored off the coast of Singapore, waiting to find Asian buyers.
However, Iranian oil has also begun to attract buyers with lower prices. According to data released by Singaporean data and analysis firm Kpler, Iran's oil exports grew faster than other Middle Eastern countries in the first quarter of this year, with an average daily oil export volume of about 1.5 million barrels.According to data from ship industry experts Vortexa Analytics and S&P Global Commodity Insights cited by Reuters a week ago, Chinese buyers have already stored at least 4 million barrels of Iranian crude oil in national reserve tanks just in the past few weeks. The cumulative data monitored shows that over the past 24 months, the National Iranian Oil Company has shipped at least 22 million tons of oil to the Chinese market, with most transactions conducted in yuan and euros.
As a countermeasure, Iranian authorities have listed the yuan as one of the country's three main exchange currencies, replacing the original position of the US dollar. The other two currencies are the euro and the UAE dirham. The Central Bank of Iran stated in a declaration that this move is to abandon the US dollar and prevent it from operating in Iran's commerce. As the following data shows, the yuan has taken the place of the US dollar.
This implies that while Iran will increase the use of the yuan, it has also found a new direction for its oil industry after accelerating the abandonment of the US dollar. Iranian central bank officials stated that the proportion of the US dollar in Iran's trade is not that high. They have even directly declared that import processes will not accept purchase orders from merchants based on the US dollar. Considering that cooperation between Iran and Chinese energy companies will continue to grow, the yuan will provide a new oil currency option for traders, including Iran, in oil transactions.
Furthermore, Iran's national television reported on May 23 that despite a rebound in oil sales in recent months that defied US dollar restrictions, Iranian authorities still insist they will reach "barter trade" agreements with other countries to help promote trade with other regions of the world. The foreign media reported that Iran's Oil Minister, Javad Owji, discussed barter trade with Cuba last month, proposing to exchange Iranian crude oil for Cuban grain to address the country's food inflation issues.
Just a week ago, Iran signed an agreement with Indonesia to expand the use of local currencies in bilateral trade, including oil and agricultural products, to bypass the US financial system. In recent months, Iran has also signed similar "barter trade" agreements with Sri Lanka, Venezuela, and Pakistan to strengthen barter trade cooperation in the fields of Iranian energy and partner countries' agricultural products.
At the same time, cooperation between China and Iran in other non-oil trade fields is also expanding. For example, in addition to importing intermediate products and technical services from China, cooperation can also be carried out in urban planning, investment, and tourism, which is crucial for the development of Iran's industrial supply chain and non-energy economy. This further means that after the Central Bank of Iran listed the yuan as a foreign exchange currency, it is also more convenient for Iran to purchase Chinese goods with yuan. Therefore, this move by the Iranian central bank will be very critical.
According to the Iranian Customs Office (IRICA) on May 20, in the year ending in April, Chinese buyers purchased nearly 30% of all Iranian export products. In the past year, the total amount of China's purchases of Iran's non-oil exports was $14.323 billion, a 58% increase compared to the same period. At the same time, the total amount of Iran's imports from China was $12.744 billion, a 29% increase year-on-year.
IRICA stated that the increase in trade volume with multiple countries, including China, Iraq, Turkey, Germany, and other European countries, is the main driving force behind Iran's efforts to diversify its economy (away from crude oil).
Data released by the Iranian Customs on May 8 showed that record sales of non-crude oil products will also offset the loss of crude oil exports. It is expected to achieve a target of $55 billion in non-oil export revenue in the Iranian fiscal year ending in March 2023. Subsequently, Iran's Deputy Oil Minister also stated that the country will completely get rid of dependence on oil revenue within the next 5 to 10 years.
Iran's land area is roughly equal to the sum of the United Kingdom, France, Spain, and Germany, with diverse climates and rich agricultural resources suitable for growing various agricultural products. In addition, Iran's advantages also include a broad domestic industrial base, well-educated and proactive cheap labor, and energy resources. The country has Turkey's consumption potential and Australia's mineral reserves. For example, Iran has 7% of the world's proven mineral reserves, including 68 types of minerals.Despite the economic recession, currency collapse, and prolonged high inflation that Iran's economy has faced under U.S. pressure in recent years, the analysis above still shows that the Iranian economy has demonstrated resilience. According to the analysis of The Economist magazine, Iran may be on the verge of transitioning from poverty to wealth, with its economy emerging from difficulties. Concurrently, a recent report from the Iranian Statistical Center indicates that inflation is declining. These signs suggest that inflation may be curbed by 2023.