* New EU steel export ban poses serious problem
* Industry in Iran suffering from sanctions
* Steel trade already hit, may decline further
By Silvia Antonioli and Jonathan Saul
LONDON, Nov 11 Iranian manufacturers and
builders face serious shortages of steel and other metals as a
new European Union export ban adds to troubles for an economy
already reeling from sanctions on its finances and oil exports.
Reliant on imports to make up a shortfall in its own steel
production, data shows Iran's purchases of foreign steel already
falling as buyers are being hit by EU and U.S. measures which
hinder banks, insurers and others supporting trade with Tehran
until Iran agrees to alter its nuclear programme.
Short of major currencies, some Iranian steel buyers have
resorted to barter deals. But explicit sanctions imposed by the
European Union on Oct. 15 on sales of steel, aluminium and other
key materials have prompted some traders to halt all sales and
Iranian businesses now face rising prices and scarce supply.
Given steel's central role in the economy, in the skeletons
of new buildings or for constructing machinery, disruption to
trade in the metal may cause far-reaching damage - exactly the
aim of the Western powers who want to prevent Iran developing
nuclear weapons and reject its denials that it has any such aim.
"The ban on metals like aluminium and steel recently imposed
by the EU has a sort of 'multiplier' effect of pushing the
Tehran regime into a new cycle of activities to dodge the effect
of the sanction, a course which will end up creating new
complications and pushing up costs," said J. Peter Pham, a
director with U.S. think-tank the Atlantic Council.
"At the current pace, Iran's ... industrial base will be
rendered a cripple."
Newly re-elected, President Barack Obama and his allies have
resisted calls, notably in Israel, for military action against
Iran's nuclear industry but have stepped up economic sanctions
to press the clerical leadership into changing diplomatic tack.
Iran has imported up to 10 million tonnes of steel annually
in recent years but data from the International Steel Statistics
Bureau (ISSB) suggest a declining trend, even before the EU ban.
Imports were about 4 million tonnes in the first nine months of
2012, almost a quarter down from the same period last year.
Builders across Iran are suspending construction projects
and channelling any spare funds into land purchases or
safe-haven assets like gold in a frantic bid to hold onto the
value of their wealth rather than take a risk with long-term
"Sanctions have completely crippled all civil projects. Now
even the strongest contractors have stopped works," Farid, 49,
who runs a major Tehran building firm, told Reuters by email.
Like many Iranians, he did not wish his full name to appear
in international media to avoid difficulties with officials.
Another Tehran executive, a 42-year-old engineer, said his
company had put off building a factory due to problems obtaining
key materials from Europe and the poorer quality of Chinese and
local substitutes: "Many projects have been stopped," he said by
telephone. "Industry has become seriously weakened."
In a measure of official concern over supplies for industry
as the value of its currency has slumped along with
sanctions-hit oil exports, Iran has banned its firms from
exporting steel. It is also trying to boost it domestic
production but that will take years to end the need for imports.
While earlier sanctions have hampered trade, the EU measures
on metals have further discouraged sellers: "Until a few months
ago we were still trying to sell steel to Iran," a source at a
British-based trading house told Reuters. "But now that these
new sanctions have come up, we have stopped completely."
While there remain grey areas of law that foreign traders
have been using to keep doing business with Iran, the new EU
regulations have had a chilling effect: "Our lawyer says the new
sanctions are ambiguous on purpose, to scare people off," the
trading source said. "And they are succeeding in that."
The world's biggest steelmaker, ArcelorMittal, is
based in Luxembourg, putting all of its global plants under EU
sanctions rules. The firm said it complied with the new orders.
Its plant in Kazakhstan, ArcelorMittal Temirtau, has sent a
substantial share of its output to Iran in the past. It said
sales to the Middle East had declined "significantly" and it cut
production by 17 percent in the nine months to September.
China, whose leaders have been cool to the Western push for
sanctions, has increased steel exports to Iran slightly but
volumes from other big suppliers South Korea and Russia have
declined since the beginning of the year, ISSB data showed.
Not every supplier, however, has taken immediate steps to
stop or reduce sales to Iran and some traders are taking
advantage of the murky formulation of the latest EU ban.
"Our lawyers said it would be fine as long as contracts date
before Oct. 15," a European trader said, referring to the date
when the EU regulations were implemented.
One trading source involved in cargo around the Black Sea
said shipments of steel to Iran from western Europe had slowed
considerably, but supplies were arriving in from elsewhere, via
Turkey and across the Caspian Sea.
"Turkey looks increasingly like the major gateway these
days," he said. "The Caspian Sea area has also provided exports
- but bear in mind with colder weather the rivers will freeze
up, so that route will not yield much for now."
Barter deals are taking place too in some case to avoid the
currency and financing difficulties: "Korean trading companies
bring in (steel) billet and the value of that billet gets paid
in oil," a Swiss-based trader said. "It's some type of barter."
The steel sector could face more disruption if further U.S.
measures under discussion emulate the EU targeting of the metal,
said Mark Dubowitz of Washington's Foundation for the Defense of
Democracies, who has advised the Obama administration.
"Iran is already experiencing an acute balance of payments
crisis, a plummeting currency, and a sharp drop in oil sales,"
he said, noting that Tehran's steel export ban showed both its
vulnerability and determination to try to ride out the crisis.
"The ban on steel exports is a sign that Iran is battening
down the hatches, husbanding its foreign-exchange reserves and
precious metals like steel, and preparing for a long ordeal."