U.S. & Iran Trade On

By John Haldane

The U.S. presently is enjoying a modest but steady comeback in the Iranian market. The Department of Commerce reports that exports to Iran during the first seven months of 1984 totaled $110.5 million, up slightly from $109.6 million for the same period in 1983. This follows on the heels of the 1983 total of $190.2 million in exports to Iran, an improvement over 1982 exports of $121.8 million. U.S. government trade experts are cautiously predicting that 1984 sales will exceed those of 1983, even though tighter export restrictions were recently imposed by the U.S.

The actual amount of exports over the last few years is considered by trade specialists to have been much larger than the figures given above. Third country transfers are not reflected in U.S. export figures and so, since Iran continues to prefer to deal with the U.S. through intermediaries or with subsidiaries of U.S. firms in third countries, it is not possible to determine the full flow of American-made products to Iran.

Beginning in mid-1983, there have been signs of Iran's willingness to deal more openly with U.S. firms, including a few instances of direct contact between Iranian government entities and American suppliers. This has been particularly true with regard to the oil services industry.

New U.S. export restrictions announced in September bar American firms from exporting to Iran virtually all types of aircraft and other equipment which Tehran might be able to use in its war with Iraq, or in support of "international terrorism." Loopholes in U.S. law had allowed companies to continue doing a fairly substantial business in military-related products with the Iranians under commitments made prior to the hostage crisis. The new September rules mean that export licenses now will be denied for any items or technology subject to national security controls. This tightening of export rules, however, does not affect the export of non-military goods to Iran.

Further normalization of trade between the two countries was dealt a blow two months ago by the indefinite suspension of the Iran-United States Claims Tribunal at The Hague. The tribunal, established under the Algiers Accord which freed the American hostages, had been functioning regularly to settle claims against Iran by U.S. companies. However, work was suspended in early September after two Iranian judges physically attacked another judge from Sweden.

So far, Iran has paid out $1.4 billion from the more than $1.5 billion escrow fund which had been set up with the Bank of England. While financial experts had expected Claims by some 20 U.S. banks to be settled during 1984, only one—with the Mellon Bank—was completed. This compares unfavorably with the 20 settlements in 1983, one of the largest of which was the $472 million settlement with the Bank of America in December. Despite the fact that most American banks are resolving their claims against Iran, none so far have resumed normal banking relations.

The original total of 550 larger claims (those over $250,000 each) by U.S. nationals has now been reduced to 362. In addition, $306 million has been paid out from a separate $1 billion account for corporate and individual claims. This amount is up considerably from the total of only $70 million a year ago.

Throughout most of the 1970's, the U.S. was one of the three major sources—along with West Germany and Japan—of Iran's non-military imports, enjoying a 17-percent market share. Major U.S. exports included oil field equipment, industrial machinery, transportation equipment, iron and steel, electrical equipment, chemicals, and agricultural products. U.S. exports to Iran during the 1980's have tended to be in the same categories, with growing emphasis on spare parts for U.S. plants and equipment already in Iran's inventory.

West Germany, Japan, and Italy were the leading suppliers to Iran in 1983, while Japan, Italy and the U.S. were the largest markets for Iran's exports.