US: Feeding Iran.

Drought stricken, Iran buys US wheat for first time in 27 years

Aug 25 10:44 PM US/Eastern

Wracked by drought, Iran has turned to the United States for wheat for the first time in 27 years, marking a setback for Tehran's search for agricultural self-sufficiency.

According to a recent US Department of Agriculture report, Iran has bought about 1.18 million tonnes of US hard wheat since the beginning of the 2008-2009 crop season in June.

The number, which has been growing steadily all summer, already represents nearly 5.0 percent of US annual exports forecast by the USDA.

The last time Iran imported US wheat was in 1981-1982.

"Number one -- they need to import a large amount of wheat," said Bill Nelson, a grains market analyst at Wachovia Securities. "If they need wheat right now, the US is the place to go."

According to Nelson, Iran's wheat production has been hammered by several months of drought, with crop forecasts of roughly 10 million tonnes this year, about five million tonnes short of the country's needs.

US wheat was the first to arrive on the markets, ahead of wheat from the European Union, Russia and Ukraine, and well before that from Australia, where the harvest is several months away.

Although Iran is subject to a growing number of sanctions imposed by Western countries that want Tehran to suspend its nuclear enrichment program, these US grain exports, like those of medications, are "legal and encouraged," a State Department spokesman, Robert McInturff, told AFP.

They require authorization from the Treasury because of a law Congress approved in 2000, the Trade Sanctions Reform and Export Enhancement Act (TSRA), he noted.

"The idea of that in 2000 was to promote certain types of exports to sanctioned countries, so there would be food, medicine, agricultural products, medical products," McInturff said.

Wachovia's Nelson underscored the tense US-Iranian relationship for many years: "it is still surprising that they are buying wheat from the US instead of waiting to buy wheat from someone else."

Analysts noted that Tehran could have used an intermediary, like Syria, to import US wheat to avoid having the sale recorded in official data.

"Maybe the relationship between Iran and the US is not as terrible as it has been," Nelson said.

In fact, a senior US diplomat took the unusual step of sitting at a negotiating table with Iranians in July. The United States is also considering sending diplomatic personnel to Tehran.

The United States has not had diplomatic relations with Iran since 1980 following the Islamic Revolution.

For Djavad Salehi-Isfahani, a specialist on Iran at the Brookings Institution, a Washington think tank, the US wheat purchase signals "Iran is more interested in showing to its people that it is not restrained by sanctions."

"The real signal is: look, we're doing fine, we can buy wheat from the US!," he said.
However, the message for internal politics was grim, he said.

"This is a serious setback for Iran from a domestic point of view because they made a big deal about self-sufficiency in grains."






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