Oil meal diplomacy!
Before someone rubbishes it, I would like to say that the struggling economy that is Iran is trying hard to overcome the tyranny of distance (and sanctions) and is looking at markets closer to home to undertake purchases, especially food and livestock feed.
As said by Tejinder Narang in The Hindu Business Line, Iran is buying oil meal from India despite the price of Brazilian soy meal turning out to be cheaper by some 15%. As uncertainty climbs, the Persian nation is looking forward to get reliable supplies.
To put things in perspective:
The country imported 744,733 tons--compared to 190,962 tons last year--of oil meal from India; a jump of 289% during April 2012 to Feb.,2013 , consisting 728,733 tons of soybean meal, and 16,000 tons of rapeseed meal.
Iran's annual requirement of soybean meal is around 22 lakh tons. By end of March 2013, Iran would have imported close to 10 lakh tons from India. That is almost 50% of requirement.
The questions doing rounds are:
1. Is Iran hoarding in anticipation of a war?
2. Is Iran switching from one supplier to another?
2. Is Iran switching from one supplier to another?
The answer could be a combination of these two:
“Recently, when Larijani--chairman of the Parliament of Iran—visited India, he stressed on developing bilateral trade with India. He said Iran was interested in increasing imports from India.” according to Mahtab Alam Rizvi, Associate Fellow, Institute of Defense Studies and Analyses and a specialist in political developments in Iran.
The P5+1 talks look to have made a better progress this time around. The US, given the mess they are in may not think of bombing Iran in the near future. “Even Israel may not go out and attack Iran on its own as they know Iran is not like Iraq or Syria.” said Rizvi. However in times of geopolitical uncertainties and potential security threats, n-number of preparations may prove to be inadequate.
Iran has a very robust livestock sector and the nation subsequent to securing its bread wheat also wants to increase feed supplies. “In one sense, yes, they may be hoarding” Rizvi said.
The Brazilian feed is now getting cheaper, but given the distance that separates South America from Iran, the country may opt for a closer-to-home strategy and may opt for switching suppliers as already evident.
Besides there are also issues related to freight insurance brought forth by sanctions.
No freight vessel could traverse the sea without obtaining adequate insurance, and the Western sanctions have ensured that this is not easily forthcoming. India seems to have found a way around this thereby making trade between India and Iran viable.
Clearly, Iran is now getting much more dependent on India. They want steady supplies of food for their people and livestock.
And what better way to secure the same than bartering/paying in rupee for imports?
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