Tehran Expands its Presence in Oman

Data published by Tehran’s Chamber of Commerce show that between March 2018 and January 2019, Iran’s two-way trade with Oman in non-oil goods grew from $570 million to $1.04 billion, an increase of 83 percent compared to the same period during the previous year. Rapidly expanding trade relations between Tehran and Muscat may draw increased scrutiny from Washington, which is wary of Iran’s efforts to evade the sanctions it reinstated last November.

Iran’s exports of non-oil goods to Oman rose to $638 million, a 53 percent increase from $417 million during the same period the year before. Meanwhile, Iran’s imports from Oman surged to $403 million, a 164 percent increase from the $153 million during the same window a year earlier.

Trade and economic relations between the two neighbors have been increasing following the implementation of the 2015 Iran nuclear deal, which Muscat facilitated by serving as a backchannel between Tehran and Washington. Since the deal, Iran and Oman have established four direct shipping lines between several of their port cities, the most recent of which was announced in December 2018. Oman also announced in March 2016 that it would issue 1,000 visas for Iranian businesspersons per year. The two countries also have been trying to build a gas pipeline between them since 2013.

While many foreign companies exited Iran’s market after the U.S. began to reinstate sanctions in May 2018, trade with Oman continued growing.

While Iranian exports of non-oil goods to Oman have grown consistently over the past five years, a surge of imports from Oman is responsible for recent gains.

While the Iranian data only considers non-oil trade, the World Bank publishes data on the total value of trade between Iran and Oman, including oil and gas, which is based on Omani economic data. While the World Bank statistics look at different intervals, the data also show a similar trend of increased bilateral trade.

Iran’s increase in trade with Oman coincides with a 33 percent decrease in imports from the United Arab Emirates (UAE). For four decades, Dubai has been a financial and re-export hub for Tehran, yet closer U.S.-Emirati relations may be disrupting these ties, leading Oman and Iraq to fill the vacuum.

According to the Tehran chamber, goods related to the automotive industry comprised 15 percent of the total value of Iran’s imports from Oman. However, the U.S. Treasury Department has sanctioned Tehran’s entire automotive sector, and Oman has no automotive production capacity. Thus, it is possible that foreign companies and Iranian importers are using Oman as a center for illicit re-exports to Tehran.

The Iranian trade data also reveal that $91 million of Tehran’s imports from Oman, or 22 percent of the total imported goods, have no specific description. This high percentage raises the possibility of sanctions evasion, including proliferation activities.

Washington should closely watch the expanding trade relations between Tehran and Muscat. If Oman becomes a center for proliferation and illicit trade, this would undermine U.S. policy towards Iran. However, the U.S. also has strong relations with Oman, and neither is interested in seeing that relationship waiver. Thus, Washington should make clear to Muscat that undermining U.S. sanctions could hurt bilateral relations.

Saeed Ghasseminejad is senior Iran and financial economics advisor at the Foundation for Defense of Democracies (FDD). Follow him on Twitter @SGhasseminejad. Follow FDD on Twitter @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.