Iran sanctions lifted, but rising Saudi tensions threaten food trade

By Eliot Beer

- Last updated on GMT

© iStock
© iStock

Related tags: Saudi arabia, Pakistan

The lifting of sanctions against Iran will open up new possibilities for the food sector, but growing tensions with Saudi Arabia makes GCC trade less certain.  

Reaction to the end of the sanctions regime was muted – in part because many US firms are still forbidden from trading with Iran. The food sector is one of the few which can do business in the country, though, and some market observers tipped companies such as PepsiCo to benefit from the new rules.

Iran is also now able to export its food products, including caviar, saffron and pistachios, to the US and other countries. And food producers in countries such as India have welcomed the opening up of the Iranian market, with the managing director of agricultural firm Rallis India telling local media there is potential for farmers to sell into Iran, which used to import 1m tonnes of Indian rice a year, before sanctions were imposed.

Saudi trade uncertain

But overshadowing the good news around sanctions was an escalation in tensions between Iran and Saudi Arabia, sparked by the Saudi government’s execution of a prominent Shia cleric. This prompted demonstrations and attacks on the Saudi embassy in Tehran, which in turn saw Saudi Arabia and other GCC countries withdraw or curtail their representatives in Iran.

How this will affect trade between Iran and Saudi Arabia and other Arab states is unclear. Iran formally banned imports of Saudi products on 7 January, but a week later the Iran Chamber of Commerce put out a press release, quoting its head, Mohsen Jalalpour, as saying political turmoil should not affect legal foreign investments.

Those foreigners who have followed the laws of Iran’s industries to invest and create jobs are our guests. They and their assets are under the protection of the responsible and committed government of the Islamic Republic of Iran​,” he said in the press release, according to Iranian state-owned media outlet PressTV.

Iran Chamber of Commerce will diligently support registered industries in possession of foreign investment​,” Jalalpour added.

Savola staying put?

He also appeared to defend Saudi food giant Savola, which has a significant presence in Iran, and earns around 15% of its income from the country. Last year Iranian critics accused Savola of flooding the market with cooking oil​, in order to increase its market share at the expense of Iranian competitors. In the press release, Jalalpour criticised those targeting investment who were behind “a wave of campaign against Saudi investors in Iranian companies​”.

Certain individuals are calling for punitive measures against these companies. Local rivals also occasionally add fuel to fire​,” he said.

After initial speculation Savola may sell its Iranian subsidiaries, the firm said it had no plans to change its operations in Iran. 

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