Currently, a 16-member delegation of Rice Exporters Association of Pakistan (REAP) is visiting Iran to enhance rice export opportunities. Iran’s rice market of over $2 billion is mostly supplied by India since the imposition of US sanctions in 2010.
Prior to the sanctions, at its peak Pak Iran trade was at $1.2 billion in FY10, mostly comprising of oil imports from Iran. 80 percent of Pakistan’s $204 million exports to Iran comprised of rice. In FY17, exports had dwindled to $30 million of which rice exports were about $5 million.
To say that REAP is trying to recapture its lost market is somewhat inaccurate since Pakistan had only a small share of the pie in the first place. However, there is a huge untapped market next door that could give exports a much needed boost.
The hurdle remains the same as it has been since sanctions, which is the unavailability of banking channels. The current hope held out by the REAP team is to try and convince GTC, an Iranian government owned company specialising in the import and distribution of essential foodstuff, to announce tenders for basmati and other types of rice so that exporters here could book export orders to Iran.
Government tenders may be one way to circumvent the lack of banking channels. Currently trade between the two countries is limited to cash and barter. The Banking and Payment Arrangement (BPA) signed by the central banks of Iran and Pakistan last year lies at the wayside as local banks did not take up the option.
This week the US has welcomed a push by some EU states to impose new sanctions on Iran and warned firms away from doing business with the country. Given Trump’s hardline stance, it is unlikely that banks would want to take on such high risks for dubious returns. It remains to be seen that whether REAP can convince Iran for government tenders to increase access to its rice market.
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