The impact of the air embargo on Iran's trade These two areas are affected by sanctions

Air transportation restrictions, although they increase the cost of transporting goods and passengers, due to the small share of this method of transportation in Iran's foreign trade, they are unable to make a decisive impact on the country's exchanges.

According to Ambassador Arjan, Iran's air transportation has never had a decisive role in moving commercial goods; But in times like the Corona period and the recent economic war, it is one of the most important routes for the transfer of medicine and pharmaceuticals to the country, and air sanctions directly increase the cost of transportation.

Kambiz Mirkarimi, member of the board of the Joint Chamber of Commerce of Iran and Russia, and Abbas Sufi, member of the Parliament's Construction Commission, discussed the effects of the air embargo on Iran's trade and the requirements to strengthen the country's trade in the conditions of economic war in the program "Dash-e-Naqd" of Ambassador Arjan TV.

Iran's commercial capacities have remained unused under the burden of internal barriers

Kambiz Mirkarimi, a member of the Board of Directors of the Joint Chamber of Commerce of Iran and Russia, referring to Iran's geographical location and being on the path of international corridors, said: Having multiple land and water borders makes it difficult to completely encircle the country. But restrictions on transportation, financial exchanges, and banking and oil embargoes increase the cost of foreign trade. However, there is still capacity to use alternative routes.

He added: Considering the country's trade volume of 270 million, air transportation, which moves less than 500,000 tons of goods, cannot alone have a decisive effect on the entire economy. However, businesses dependent on this mode of transportation, including tourism and some importers, face increased costs.

Referring to the experience of replacing air routes with land routes, Mirkarimi said: In the past, part of the meat needed by the country was supplied from Australia in winter, but with the development of trade relations with Russia and the activation of northern routes, it became possible to import land from distant countries, including Mongolia. This experience shows that the development of land corridors can reduce the dependence on air transportation.

Trade capacities with Russia are not yet fully activated

Referring to the development of relations between Iran and Russia since 1397 and 1398, Mirkarimi considered Russia's sanctions after the Ukraine war and the free trade agreement between Iran and the Eurasian Economic Union as factors in strengthening the trade relations between the two countries.

According to him, Iran's exports to Russia in the years before this development were around 200 to 300 million dollars and sometimes 400 to 500 million dollars. In 2018, exports increased by about 60% and the upward trend continued; So that in some of the mentioned statistics, the figure of 2300 million dollars has been recorded.

He emphasized: business growth does not necessarily mean infrastructure readiness. The development of transportation, loading facilities, storage of perishable goods, and logistics services should be proportional to the increase in exchanges. At one point, in order to regularize the movement of ships and provide the possibility of transporting perishable goods, the government subsidized shipping; But the volume of business was not enough to justify a larger investment.

Mirkarimi added: Before the free trade agreement, some Iranian exporters faced more customs fees than their competitors. This agreement removed some of the obstacles, but it is not enough for the development of exchanges. Changing the direction of Russian trade to eastern markets and increasing the importance of the north-south corridor has created a new opportunity for Iran. Some exporters are also looking for alternative markets in neighboring countries due to the limitation of sea routes.

The capacity of northern ports is three times the current performance

Referring to the difference between the nominal capacity and the actual performance of the northern ports, the member of the board of directors of the joint chamber of commerce of Iran and Russia said: the capacity of moving goods in these ports is about 30 million tons, while the amount of use is estimated at about 9 million tons. In the land borders, the full capacity of the terminals is not used.

He added: The problem is not limited to roads, ports and railways, and commercial systems, customs formalities and the process of issuing licenses also affect logistics performance. In some cases, goods are delayed due to multiple permits and clearance procedures. Even the use of alternative routes for the exchange of goods such as urea also faces problems due to the lack of definition of the necessary procedures in the commercial systems.

Mirkarimi emphasized: Regulations must be in harmony with the real needs of business. The law on continuous improvement of the business environment also emphasizes the participation of the private sector in decision-making and receiving the opinions of economic organizations before issuing regulations, but this mechanism is not fully implemented.

Replacing sea routes requires investment

Mirkarimi said: Iran's land borders have the capacity to respond to a part of the increase in exchanges, but it is not possible to transfer the entire volume of maritime trade to these routes with the current infrastructure. It is necessary to develop infrastructure on both sides of the border, transport fleet and remove administrative obstacles.

Referring to the reported problems at the border of Rimdan and some crossings in Türkiye, he added: In some cases, trucks were stopped on the other side of the border and could not move. This situation shows that the operational capacity of some crossings is not proportional to the sudden increase in demand. On the other hand, the doubt of investors about the temporary nature of the restriction of sea routes makes it difficult to develop border infrastructure.

According to him, with economic diplomacy, removal of obstacles to the passage of trucks and development of road and rail routes, the capacity of the North-South Corridor and the eastern and western routes of the Caspian Sea can be used more. Although the capacity of the rail network has increased, the transportation of special goods still requires specialized equipment. For example, the shortage of liquid tankers has made it difficult to implement some contracts. Providing this equipment is time-consuming and if the restrictions continue, investment in this field will be necessary.

Currency and banking policies prevent the use of business capacity

Mirkarimi considered currency policies and banking problems to be another obstacle to trade development and said: even establishing banking relations between two countries will not lead to full use of this capacity if there are disproportionate internal regulations and exchange rate differences.

Referring to the banking relations between Iran and Russia, he added: After the access to SWIFT was cut off, alternative routes were created to transfer bank messages, but settlement problems continue. About two years ago, some exporters entered into transactions with the assumption that the ruble would be converted at a rate close to the market, but during settlement, banks applied a different rate based on the instructions of the central bank, and the exporters suffered.

According to Mirkarimi, such experiences reduce trust in official banking channels and lead some companies to receive export income in third countries; A situation that keeps part of foreign exchange resources outside the country's banking network.

He listed multi-rate currency, order registration and queues for currency allocation as other obstacles to trade and emphasized: reducing customs tariffs alone is not enough to increase exchanges, and currency and trade policies must also be coordinated with the goals of international agreements.

Pointing out that Iran's imports from Russia in the past were about four times its exports to this country, Mirkarimi said: "The ratio of exchanges has moved towards a greater balance, but the capacity of the Russian market is still much greater than the current trade between the two countries." Russia's imports have been estimated at around 270 to 320 billion dollars in different periods, while the volume of trade between Iran and Russia has been around one billion dollars.

Production support should focus on economic benefits

Referring to the limitation of foreign exchange resources, the member of the board of directors of the joint chamber of commerce of Iran and Russia said: In the past, oil revenues made it possible to import and support industries that did not necessarily have an economic advantage. Some domestic products need preferential currency, bank facilities and continuous support, but they are not competitive enough in terms of price and quality. In the context of limited resources, these policies need to be revised.

He added: Sanctions in the past years, especially the import restrictions of 2017 and 2018, showed the necessity of domestic production of some goods. But this necessity is not the same for all goods. The cost of production, the need for imported inputs, the level of government support and the possibility of competing in foreign markets must be measured at the same time.

Referring to the relative advantage of the country, Mirkarimi said: In the field of livestock and meat, for example, the possibility of exporting livestock to neighboring countries and importing meat from areas with lower supply costs can be investigated. Simultaneously preventing the export of livestock and limiting the import of meat may increase the cost of supply.

He emphasized: The development of foreign trade cannot be achieved only by creating alternative routes and signing trade agreements. It is necessary to invest in infrastructure, modify regulations, stabilize currency policies, facilitate banking relations, and involve the private sector in decision-making. Utilizing the capacity of neighbors and international corridors will increase the resilience of the economy when domestic reforms are carried out at the same time.

Air embargo and disturbance in the movement of passengers and goods

Abbas Sufi, a member of the Parliament's Construction Commission, referring to the connection between the air, land, rail and sea sectors, said: Sanctions have affected the performance of all areas of transportation, and despite the efforts of the responsible institutions to reduce the damage, the increase in costs and their economic consequences cannot be ignored.

He added: Air sanctions affect the two sectors of goods transportation and passenger transportation. Although the effect of restrictions on the transportation of goods on the whole economy may be less noticeable, the transfer of medicine and the transfer of patients are of particular importance. Sufi considered the disruption of these services as an act against humanity and demanded legal follow-up through international authorities.

According to him, the effect of sanctions is more noticeable in passenger transportation. Some countries have complied with these restrictions, while in relation to others, the sanctions have not been fully implemented.

Sufi said: Currently, there are no flights to Qatar, the UAE and Iraq, and only Najaf flights are operated. The Civil Aviation Organization, in coordination with the Ministry of Foreign Affairs and embassies, conducts diplomatic follow-up to re-establish flights. He also appreciated the cooperation of the Iraqi people to solve the created problems.

Referring to the continuation of efforts in the maritime, land and rail sectors, the member of the Parliament's Construction Commission added: Despite the cessation of direct military conflict, the country is still in a state of war and the responsible agencies are trying to reduce the damage. According to him, a visit was also made to the Strait of Hormuz last week, and some of the measures cannot be explained at the moment due to security considerations.

Sufi emphasized that the responsible agencies are trying to prevent disruptions in the supply of basic goods and medicine. He considered America's claim that it has nothing to do with the Iranian people incompatible with the restrictions imposed on air transportation and said that these restrictions affect not only travel, but also the transfer of medicine and the transfer of patients.