Iran barters with gold and oil to pay for food

Iran is turning to barter – offering gold bullion in overseas vaults or tanker-loads of oil – in return for food as new financial sanctions have hurt its ability to import basics for its 74 million people, traders have revealed.

Difficulty paying for urgent imports has contributed to sharp rises in the prices of staple foods, causing hardship for Iranians with just weeks to go before an election seen as a referendum on president Mahmoud Ahmadinejad’s economic policies.

New sanctions imposed by the United States and European Union to punish Iran for its nuclear programme do not bar firms selling Iran food but make it difficult to carry out the international financial transactions to pay for it. With Iran’s rial tumbling, the prices of rice, bread and meat in its bazaars have doubled or more in dollar terms in recent months.

Iran has been trading oil in Japanese yen, South Korean won and Indian rupees, but such deals make it difficult to repatriate profits. Deals revealed yesterday appear to be among the first in which Iran has had to resort to barter to avoid sanctions, a sign of new urgency as it seeks to break the embargo.

“Grain deals are being paid for in gold bullion and barter deals are being offered,” one European grain trader said. “Some of the major trading houses are involved.”

Another trader said: “As the shipments of grain are so large, barter or gold payments are the quickest option.”