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Iran Officially Announces Oil For Goods Plan

Iran -- A picture shows export oil pipelines at an oil facility in the Khark Island, on the shore of the Gulf, February 23, 2016

Iran says the era of oil for goods will officially start within a week, per the Minister of Oil and the Governor of the Central Bank of Iran (CBI), who announced the government's plan to exchange oil for goods and expressed hope that Iran's foreign trade would increase.

In a joint meeting with the Ministers of Industry, Mines and Trade, Jihad Keshavarzi (Agriculture) and the Governor of the Central Bank of Iran (CBI) on Thursday, the Minister of Oil, Bijan Namdar Zanganeh, said that Iranian President Hassan Rouhani, has endorsed his Ministry's new plan.

President Rouhani has accepted their proposal to create a "unified channel" for importing goods in exchange for oil, Namdar Zanganeh said, adding, "We will start operations next week."

Meanwhile, the Governor of the CBI, Abdolnasser Hemmati, also said that the supply of goods needed by the country, including essential goods and raw materials required by the production sector, is the government's priority in the forthcoming barter agreements.

He claimed that "barter agreement is a classic way to deal with sanctions while developing the countries' foreign trade."

Hemmati's remarks about the effectiveness of barter agreements in dealing with sanctions come as Iran has already used it to sell crude oil to Russia, South Korea, and the European Union but has failed to achieve its aims.

On the other hand, according to reports, Iran is still using barter agreements for foreign trade but has not been remarkably successful in exporting oil.

Last August, the acting Minister of Industry, Mines and Trade, Hossein Modarres Khiabani, said, "The Iranian government has no choice other than applying outdated methods such as barter agreements to trade with other countries."

Speaking to the Fars news agency in August, Modarres Khiabani referred to the U.S. sanctions imposed on Iran and claimed that methods, such as barter agreements, are "unbelievable and unimaginable for many businessmen around the world."

However, Hemmati took the position on Thursday that in the current situation, in which Washington is considering various plans to block Tehran's monetary and banking transactions, exchanging oil for goods could be a breakthrough for the government.

He further claimed that we would see a "momentous change" in Iran's foreign trade by barter agreements, adding foreign trade will definitely increase in the second half of the current Iranian calendar year, which began on March 20.

It is not yet clear how Iran wants to create an "enormous difference" by exchanging oil for goods, because the problem for Iranian oil buyers is not just paying with hard currencies, but also the fact that the U.S. has sanctioned "buying oil from Iran."

Currently, only China, Syria, and Venezuela are public customers of Iranian oil, though the U.S. has so far sanctioned dozens of Chinese companies for their connections with Iran, and Syria and Venezuela are currently under U.S. sanctions.

Iran's daily oil and gas exports have dropped from 2.5 million barrels in the pre-sanctions period to about 300,000 to 400,000 barrels.

Iran's customs statistics show that the country's non-oil exports in the first half of the year fell by 35 percent compared with the same period last year to $13.5 billion. Moreover, for the first time, Iran has included gasoline in the basket of non-oil exports, which currently tops that list.

In the second quarter of 2020, Iran exported $700 million worth of gasoline, accounting for 11 percent of the country's total non-oil exports. There have been no reports of gasoline exports in the summer. Still, Fars News Agency reported last Wednesday that on the same day, "two shipments of eleven million barrels, a total of 22 million barrels of Iranian 87-octane gasoline from the port of Bandar Abbas, at $32.14 per barrel, were exported to offshore destinations through Iranian energy stock market's international ring."

However, Iranian authorities have not said why, while crude oil prices are above $40 in international markets, they sold gasoline for only $32.

The Fars news report also claims that another shipment of six million barrels of 87-octane gasoline from the Bandar Abbas oil depot was traded and exported at the same price to offshore destinations, with a total value of more than $1 billion.

Unlike crude oil, Iran's gasoline exports are not subject to U.S. sanctions.