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UK-IRAN-TRADE:Iran s non-oil exports recovering under Rouhani, business says
Reuters Iran's President Hassan Rouhani smiles during a session at the annual meeting of the World Economic Forum (WEF) in Davos January 23, 2014. REUTERS/Ruben Sprich

By Andrew Torchia and Michelle Moghtader

DUBAI (Reuters) - Iran's non-oil exports are starting to feel the benefits of easing international tensions under new President Hassan Rouhani, Iranian businessmen at one of the world's biggest food industry shows say.

Organisers of the annual Gulfood fair in Dubai said 46 Iranian exporters have stands at this week's event, roughly double last year's number - a sign of Iran's partial return to the global trading system since Rouhani took office in August.

Key banking sanctions remain in place, making it hard for some Iranian companies to obtain payments for their exports, and difficult business conditions at home continue to hurt.

But an interim agreement with world powers last November to limit Iran's nuclear programme in exchange for a temporary, partial easing of the sanctions appears to have created conditions for Iranian trade to grow.

"Better political relations pave the way for us to introduce products into more markets," such as Kuwait and Saudi Arabia, said Reza Rajabinasab, export manager at Amadeh Laziz, an Iranian maker of instant noodles, soups and other food products.

He said his company's exports, worth millions of dollars annually, had risen 10-15 percent since Rouhani took power.

Iran Dairy Industries Commercial Co, which sells to Iraq, Pakistan and Malaysia among other countries, said its exports for the first 10 months of the Iranian year that started on March 21 had jumped to $15 million from $9 million in all of the previous year.

SANCTIONS

Iran's oil exports, which traditionally account for about three-quarters of its total exports, have plunged by more than half since 2011 because of the sanctions, imposed over suspicions that Iran was trying to develop nuclear weapons.

The collapse has made non-oil exports not banned by the sanctions, such as food, more important to the country as it grapples with a recession and high inflation.

Iran exported $29.24 billion of non-oil goods in the first nine months of the Iranian year, according to customs data quoted by local media. That was down 7.7 percent from a year earlier, but many of the Iranian firms at Gulfood said the trend had turned positive in the last few months.

Washington does not want to see a boom in Iran's trade unless Tehran reaches a final agreement on its nuclear programme. President Barack Obama said this month that he would come down like a "ton of bricks" on companies violating the sanctions.

As a result, most banks around the world - even in Dubai, a hub for Iranian business - still refuse to handle trade payments for Iran. This forces firms to use costly, inconvenient methods such as barter - Amadeh Laziz accepts shipments of food and raw materials as payment for some of its exports.

"Banks in the United Arab Emirates are not doing any business whatsoever with Iran. We are respecting the sanctions," Abdulaziz Al Ghurair, chief executive of Dubai's Mashreq bank, told Reuters this month.

Nevertheless, Rouhani's diplomacy seems to be helping Iranian exporters in at least two ways.

By creating hope for a resolution of Iran's nuclear dispute, he has halted wild swings of the rial currency, which lost roughly half its value against the U.S. dollar in 2012.

"The stabilising of the dollar has helped a lot and decreased the risk of doing business. It's stabilised our prices," said Mohammad Ali Khoshbin, an executive at the Khoshbin Agro Group, which exports pistachios and raisins to North Africa and Europe.

With the risk of an immediate crisis over the nuclear programme receding, foreign buyers of Iranian products also feel safer signing contracts.

"Definitely, Europe has been in more contact with us" since Rouhani took office, Khoshbin said.

DOMESTIC ENVIRONMENT

Iran's export industries are also struggling with the legacy of years of chaotic economic management by Rouhani's predecessor, Mahmoud Ahmadinejad. For example, interest rates have had to be hiked to offset high inflation.

"Companies can't work well if they face interest rates above 20 percent, compared to 3, 4 or 5 percent for their competitors abroad," said Ali Shariati Moghaddam, general director of Novin Saffron, which exports $30-40 million of saffron annually.

But there are signs that the Rouhani administration is starting to reform some of the most damaging policies for business, executives said.

Ahmadinejad imposed a 7 percent tax on dairy exports in order to ensure domestic supplies, but this backfired when some farmers lost money and slaughtered their cows, an official at Iran Dairy Industries said. Rouhani removed the tax, he said.

Rajabinasab at Amadeh Laziz said a full lifting of the sanctions would trigger a surge of Iranian exports into global markets, and compared his company to a runner waiting at the starting blocks.

"I am keeping my eye on a number of markets and when the way is clear, I will go after them," he said.

(Additional reporting by Mirna Sleiman; Editing by Sonya Hepinstall)