As security deteriorates, Lebanon exports to Iraq declined sharply

Lebanon’s total exports to Iraq will experience a sharp decline over the next few months due to the deteriorating security situation in the country that represents the fifth-largest recipient of Lebanese products, industry experts told.

The ongoing conflict in Iraq is forcing Lebanese industrialists to abandon land shipping through Syria and Jordan that has nearly doubled in cost, said Fadi Abboud, the former head of the industrialists association.

Abboud told that some insurance firms are even refusing to cover shipments to Baghdad due to the deteriorating security situation.
Land shipments to Iraq since the conflict broke out between government forces and the Islamic State in Iraq and Greater Syria was taking up to 45 days, said Jacque Sarraf, a leading industrialist.

Today, land shipping has nearly stopped with Lebanese exporters resorting to maritime shipping. The cost of maritime shipping has increased by 50 percent, according to Sarraf, who said Lebanese industrialists are shipping goods by sea to Turkey then transporting them to Kurdistan and from there to Baghdad.

An alternative route is maritime shipping of products to the southern Iraqi region of Basra and then taking it from there to Baghdad.
Mr. Sarraf also said, “We are even facing problems with internal transportation in Iraq.” The increase in shipping costs is dealing a heavy blow to Lebanese exports, which face fierce competition from Turkish and Iranian exports, Abboud said.

In addition to being an important trade partner to Lebanon, Iraq represents a transit route to Gulf countries. While no official statistics have been released yet on the value of exports to Iraq during the month of June, Sarraf expects them to drop by 75 percent compared to the same month of last year. Lebanon’s general exports to Iraq stood at $41 million and $54 million respectively in June and July 2013.

“Usually, the month that precedes Ramadan sees a spike in exports but it will not be the case this year as Lebanese exporters are adopting a wait-and-see approach with many storing goods intended for exports to Iraq,” Sarraf said.

Iraq’s share of total Lebanese exports stood at 7 percent in 2013, ranking fifth after Syria with a share of 13 percent, South Africa with 10 percent followed by Saudi Arabia and the United Arab Emirates with 9 and 8 percent respectively.

Machinery and electrical equipments represent the largest share of Lebanese exports to Iraq at 34 percent followed by agro-food products with a share of 19 percent, chemicals (15 percent), cosmetics (10 percent) and wood and paper (10 percent). Agro-food exports are expected to decline the most as their price increase due the rising shipping costs will leave them most vulnerable to fierce competition from Turkish exports to Iraq, experts say.

Despite the difficulties facing Lebanese industrialists, the government has done nothing to support exporters, according to Abboud. The industrialist, who was also a former tourism minister under the previous government, says the Cabinet should abolish all forms of fees and tariffs imposed on exporters.

“For example, it costs me around $800 to load a container on a ship. The cost of transporting and loading the container amounts to $350 and the rest is charged under the form of fees in the absence of any transparency,” Abboud said. The challenging circumstances, didn’t however, prevent some industrialists from striking a positive note regarding a promising future for Lebanese exports to Iraq.

“The Iraqi market is a vast and very promising one and any decline in exports due to the current conflict should be temporary,” Former Industry Minister Freij Sabounjian stated.
“Even if the conflict drags on, Lebanese exporters should find alternative means to tap the Iraqi market.”