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  HOME | Brazil (Click here for more)

Brazil and Iran Economic Relationship Threatened by Trump Sanctions

SAO PAULO – Brazil and Iran, two countries with fluid commercial relations, have run into difficulties because Brazil’s state-owned company Petrobras refused to supply two Iranian vessels, following the embargo imposed on Tehran by United States President Donald Trump.

The incident, which ended this week with a judicial decision from the Brazilian Supreme Court ordering the supply of both ships, reflects the political and ideological harmony between Brazilian President Jair Bolsonaro and Trump, experts told EFE.

However, the friction between Brasilia and Tehran could trigger a deterioration of their commercial relations.

Iran is Brazil’s main trading partner in the Middle East and one of the largest importers of Brazilian corn.

Between January and June of this year, it was responsible for the purchase of 36% of the cereal, which translates into 2.5 billion tons imported and $470 million injected into the Brazilian economy, according to data from the Ministry of Economy.

“The big problem is that if this situation worsens, Iran can simply say that it will not buy more from Brazil and will look for new suppliers,” Salem Nasser, international law professor at the Getulio Vargas Foundation, told EFE.

According to Nasser, the Supreme Court ruling “momentarily relieves” the issue, but he added that the crisis “is already installed.”

“There is a government decision to cut off Iran, although without a deep reflection of the president about the consequences that would bring to Brazil and the economy,” he said.

“Although the conflict has been overcome for now, the Iranians will question when buying what the next few times will be like, if Brazil will let the load leave or not.”

Two Iranian cargo ships, Bavand and Termeh, arrived in Brazil loaded with urea, a fertilizer in high demand among farmers, and should return to Iran with a load of about 100 tons of corn.

However, vessels have remained parked since the beginning of June in the port of Paranagua, in the southern state of Parana, in the face of Petrobras’ refusal to supply them with fuel.

Faced with the growing political tension, the Iranian ambassador in Brasilia Seyed Ali Saghaeyan said that his country could boycott Brazilian imports and seek new suppliers.

In 2018, Brazil’s exports to Iran totaled around $2.26 billion, which resulted in a surplus of $2.22 billion in the trade balance of the largest economy in South America.

The country is among the five largest buyers of agricultural products in Brazil with corn, soybeans and meat among the most sought-after merchandise.

Marcelo Fortes, a maritime law professor at FGV, said that Bolsonaro and his policy of predilection towards the United States and Israel is “creating a very dangerous conflict, not only with Iran but with the Arab countries.”

“When Brazil most needed foreign investments, it was the Arab countries that were here,” he added.

“Today they are still in the country, driving above all the agricultural and livestock sector.”

Since taking office on 1 January, Bolsonaro has made clear his political and ideological harmony with both the US and Israel, which has caused discomfort in the Middle East.

On the situation with the Iranian ships, the president said that “everyone knows” that Brazil is in line with the US policies and that “what must be done is done.”

“Brazilian companies were notified about this problem (the sanctions) and are taking risks,” the president added.

Fortes said that Brazil is getting involved in someone else’s fight because of the “issues of rapprochement between Bolsonaro and Trump.”

He added that, because the Iranian vessels are in Brazilian maritime territory, the country has the sovereignty and jurisdiction to act autonomously, so “there is no justification for such a rude attitude on the part of the government.”

Both experts agreed that a “blind” and unilateral narrowing with the US could bring harsh consequences to the Brazilian economy, as the two countries are “direct competitors” in some sectors.

“The US will never buy corn from Brazil, as they are a giant producer,” Fortes said.

“Already the Arab countries and Iran have a complementary relationship, with interesting trade changes and that is quite beneficial.”

 

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