Attempts to use agricultural trade as a diplomatic weapon have distorted markets for decades, but no single commodity has borne a greater burden than rice.
The poster child for this abuse is Cuba, where trade was banned shortly after the 1960 revolution, and is still the focus of U.S. government interference. Congress passed the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), but every administration since then has ignored the intent of the legislation, which says food and medicine cannot be used as “pawns” in any diplomatic dispute.
Since the lifting of nuclear-related sanctions in January, headlines like “Iran is Back in Business” have dominated the daily press, leading to conclusions within the rice industry that Iran will resume buying from the United States. Our market was taken away in 1979 with the occupation of the U.S. embassy in Teheran, and has remained closed to new sales with several exceptions in 1992, 1994, 2012, and 2015. If France can sell Airbus jets, we can now sell long-grain milled rice to Iran, the logic goes.
Both history and current economics suggest that this analysis is not solidly based. Yes, when Iran and its oil-exporting neighbors became big importers in the early 1970s, U.S. rice was a consumer and importer favorite. In the 10 years from 1971 through 1980, the United States sold 60 percent of all the rice imported by a customer that now regularly purchases at least 1.6 million tons per year. Yes, the Thai rice that replaced U.S. product was not well liked. But today Iranian importers have access to Indian basmati and other very high quality long grain varieties, shipped from virtually next door.
The major issue is that while the rest of world is rushing to reestablish business with Iran, the United States retains sanctions related to human rights issues and Iran’s alleged support of terrorism. Those residual sanctions continue to frighten many in the business community, especially in the financial industry. There also a deep distrust between the two countries that will take some time to dissolve.
Our representative in the Middle East notes: “The lifting of nuclear-related sanctions is definitely expected to lead to a surge in business between Iran and the West. People have been waiting a long time for this to happen, and now that it has, all eyes are on Iran. With rich natural resources and a young, educated population of roughly 80 million, Iran represents a potentially lucrative market for foreign investors. Also, Iran has a large diaspora community that would likely be supportive of Iran’s opening up for business."
In expectation of Iran opening up, we have heard that some major multinational companies have in the past year, sent representatives to the market on “reconnaissance” missions to talk to people and see where the opportunities are. Some of the challenges for U.S. companies will be to establish physical presence in Iran or to partner directly with Iranian companies.
If letters of credit issued by Iranian banks are accepted in the United States, it would overcome a major hurdle to trade. Then we would likely see more rice and other commodities being channeled more easily into Iran. Currently, Iranian traders are using their Dubai associates to trade and do business.
Right now, it seems that positive moves are already being made in the oil and industrial sectors. We expect that at some point, this will be followed by essential agriculture commodities.
In short, the potential to export more U.S. rice into Iran is high, but more work and time is needed so that trade is facilitated.
May the U.S. rice industry survive long enough to make new sales to both Iran and Cuba.