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Traders: EU banks halt Iran grain trade finance

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Jan. 26, 2012, 8:33 p.m. | Business — by Reuters

Reuters

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LONDON/HAMBURG, Jan 26 (Reuters) - Major European Union banks have pulled back from financing grain shipments destined for Iran, hampering trade with the major importer of maize, banking and trade sources said on Thursday. "It is now a fact that no EU banks will do trade financing for Iran destination cargoes of grains, oilseeds or whatever," one European grain trader said.

"The bottom line is it is very difficult to work trading to Iranian destinations through banking systems. Some Iranian buyers are seeking to use other payment methods avoiding letters of credit, basically direct payment, but this is unworkable for large-size shipments."

One European banking source said the major banks had halted trade financing for agricultural products destined for Iran and that any new deals would have to be backed by smaller entities.

Iran imports around 4.5 million tonnes of grain a year, including about 3.5 million tonnes of corn, the leading world grain for animal feed, according to International Grains Council figures. It ranks among the top 10 global importers of maize.

Its key corn suppliers include Brazil, Argentina and Ukraine.

"As far as I know there are six panamax and three handy-size bulk carriers waiting in the anchorages off Iranian ports and unable to unload because of payment problems," the trader said.

Panamax vessels carry around 55,000 tonnes of grain and handy-size vessels roughly 30,000 tonnes, indicating a potential total tonnage of about 420,000 tonnes held in ships off Iran.

Most Iranian grain deals are between private entities, traders said.

SANCTIONS AGREED

EU governments agreed on Monday to an immediate ban on all new contracts to import, buy or transport Iranian crude oil, a move to put pressure on Tehran's disputed nuclear programme by shutting off its main source of foreign income.

A sharp decline in the value of Iran's currency, linked to Western sanctions, has also created payment difficulties.

"The Iran trade is in chaos with devaluations, and payment difficulties are causing ships to be delayed. It is hard to guess the numbers, but delays of up to 60 days are being talked about," another European trader said.

An industry source in Ukraine said the country's exports to Iran had been halted as traders waited for further developments.

"Some sent a few ships to Iran and (are) ready to ship more, but they are waiting," the industry source said.

A European sugar trade source said that, according to his records, the last sugar deliveries to Iran were reported in November. He did not expect any of the vessels lined up offshore Iran to be carrying sugar.

"I expect the Iranians to buy sugar again - in the June to August period, or possibly a little earlier," the source said.

Iran is expected to import about 1.6 million tonnes of sugar in 2011/12 (October/September), according to the International Sugar Organization's latest quarterly report issued in November.
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