Page 5 - IRANRptJul22

The Iranian rial (IRR) hit a record free market low of 332,700/$ on June 12 as market sentiment further soured on prospects for the talks aimed at keeping alive the nuclear deal. The euro and the pound sterling also fell to all-time lows at IRR349,900 and IRR400,000, respectively. The pound broke the 400,000 barrier for the first time in 2022.
The worsening “street rate” of the dollar and other hard currencies in Iran are a further burden to the consumer faced by painful inflation, officially at around 40%. Prices for wheat-based, dairy and pasta products in Iran have been rising at a far faster rate.
Iran’s official annual inflation rose 13.2 pp to 52.5% in June from 39.3% in May,theStatisticsCenterofIran(SCI)announcedonJune28. Price
growth in food, beverages and tobacco grew by 32.2 pp to 81.6% in June, while nonfood goods and services prices moved up by 2.8 pp to 36.8%.
Iran, the Middle East’s top wheat producer, is expected to see production drop 20% this year to 12mn tonnes, which is 17% below the 5-year average, according to Gro Intelligence. The country’s wheat-growing areas have experienced “severe” levels of drought since mid-2021.
Iran could also see mass closures of poultry farms in the next three months as a result of a government plan to rein in food inflation with price caps. Farmers were losing the incentive to keep operating with such farm-gate prices, despite promises from officials that subsidies would buoy their working capital, according to the National Union of Broiler Farmers. In early May, Iran was hit by unrest after the government cut subsidies for eggs, chicken, dairy products and cooking oil.
Social tensions in Iran have risen amid surging inflation, including steep hikes in food prices, and a series of strikes mounted by workers including teachers and bus drivers in Tehran. In the past year, the country has also been hit by protests over water shortages.
The blow to Iranian consumers came a day after Iranian oil and petrochemical workers began a strike for higher wages, with their industries becoming the latest of several in Iran to be plunged into turmoil by cost-of-living protests.
Meanwhile, the Ukraine conflict has reportedly resulted in a surprising surge of trade flows from Europe to the East and South via Iran, which saw Iranian goods transit increase 52% in March and creates something of a political quandary for both the European Union and United States, as Iran, like Russia is also under significant US sanctions.
With sanctions still in place in an effort at keeping Iranian oil off world markets, Iran has been relying on China turning a blind eye to American demands to import substantial amounts of Iran’s crude on the grey market.
Iran's oil export volume is running at a level 40% higher than was seen a year ago, according to the National Iranian Oil Co (NIOC).
However, an estimated 40mn barrels of Iranian crude oil is currently stuck offshore in ports around Asia looking for a buyer. As prices of Russian crude have fallen in the weeks following Moscow’s invasion of Ukraine, more and more oil cargoes from Iran have found themselves without end
5 IRAN Country Report July 2022 www.intellinews.com