A board member of the Iranian

A board member of the Iranian Bitumen Association:

Bitumen export is stuck in the ambiguity of the circulars to remove foreign exchange obligations

According to experts, in a situation where producers have to buy the feedstock for their industry either in cash or by settlement in short intervals, non-reimbursement of added value has had a significant impact on reducing exports. In this regard, a board member of the Iranian Bitumen Association believes: “If the working capital of companies is locked up in the form of added value, the value of these amounts is not comparable to their rising value due inflation and the increase in global prices. In some cases, these amounts have not even been returned and thus the production wheel has stopped working.”

According to Seyed Hamed Hosseini, the Ministry of Industry, Mine and Trade can play a significant role in organizing feedstock for production units, and the Trade Promotion Organization, as the responsible entity for removing foreign exchange obligations, can help exporters. The Export Guarantee Fund can also solve part of the problems caused by the sanctions through export financing. The following is our interview with Seyed Hamed Hosseini, a board member of the Iranian Bitumen Association, centered on the challenges and capacities of bitumen export:

Currently, what are the most important challenges for exporters in destination markets?

The important thing is to know that Iranian bitumen is one of the best in Asia and has a brand in international markets, and Iran’s production capacity can be more than seven million tons per year, but this cycle has weakened over the past years. For example, in 2019, Turkey banned the import of Iranian bitumen for unknown reasons. This caused problems for the transit of this product from this country to some other countries such as Georgia and Bulgaria. This is while a part of Iraq’s bitumen is exported through Iran. On the other hand, the cruel US sanctions have created many problems in transportation, banking and insurance.

In the meantime, the export of Iraqi bitumen from Iran is another major problem for exporters, which has occupied Iran’s export capacity in the situation of lack of fleet and has been put in competition with Iranian bitumen in the destination markets.

What institutions and organizations can contribute the most to the development of bitumen export and how?

The Ministry of Industry, Mine and Trade can play a significant role in organizing feedstock for production units, and the Trade Promotion Organization can help exporters, as the responsible entity for removing foreign exchange obligations. The Export Guarantee Fund can solve part of the problems caused by the sanctions through export financing.

Also, the Ports and Maritime Organization can strengthen exports by supplying gas to the export bulk bitumen terminals and facilitating the conditions in the container yards. The Ministry of Roads is also able to reinforce this area by increasing the transit costs of Iraqi bitumen and strengthen the international and domestic transport fleet.

The National Tax Administration and the Central Bank can provide exporters with the possibility of financing through refunding quickly the added value to exporters. The Trade Promotion Organization can take a big step in the development of bitumen export by removing the obstacles to fulfill exporters’ foreign exchange obligations considering the non-exemption of the export of this product from performance tax.

What is the status of Iran’s bitumen competitors in export markets?

According to customs statistics, Iran’s bitumen export has decreased by more than 30 percent in Farvardin this year (March 21 to April 20, 2022) compared to the same period last year. There are several reasons for this. On the one hand, the big bitumen exporters in the world have attempted to create an advantage for themselves in the global markets. This factor has decreased the price difference between Iran’s bitumen and the bitumen of countries such as Korea and Singapore. On the other hand, construction budgets have decreased, especially in road construction in target markets, which has caused a decrease in the global demand for bitumen.

Recently, Iraqi bitumen has gained a significant share in the global market. The import of cheap Iraqi bitumen with a difference of about 30 dollars has had a significant impact on Iran’s exports. Due to the cruel US sanctions, Iranian exporters are unable to use international transportation services at a reasonable rate and benefit from modern and up-to-date methods. The same applies to customers and buyers of Iran’s export bitumen. This issue causes Iran to lose parts of its global market.

It should be noted that Iran’s markets in the world are limited to certain customers, and in recent months, with the involvement of governments with more fundamental issues such as grain prices and the food crisis, the priorities of governments have changed, which has also affected bitumen exports.

What factors have caused the most damage to Iran’s bitumen exports in the past three years?

Some factors include changes in the circulars to remove foreign exchange obligations, extreme fluctuations in global prices, commercial companies’ financing from the export bitumen market, weakening the producers of this product by supporting state-private companies, creating obstacles in the international transportation of bitumen, banning the transit of Iranian bitumen to Turkey and Georgia, the Ministry of Roads and the National Tax Administration’s not fulfilling the demands of bitumen manufacturers, the failure to provide feedstock to production units at the right price and quantity at the required time.

What effects have the circulars for foreign exchange obligations had on bitumen export?

Ambiguity in the circulars to remove foreign exchange obligations has blocked the path of exporters to develop the market. If the criterion is the decision by the economic coordination headquarters of the government in Mehr 1400 (Sep. 23 to Oct. 22, 2021), it stipulates that only the tax exemption is subject to the fulfillment of foreign exchange obligations, while it is explicitly stated in the budget bill that the export of bitumen is subject to performance tax. On the other hand, the value added tax must be refunded one month after the export, regardless of the fulfillment or non-fulfillment of foreign exchange obligations, which is currently not implemented.