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Fri 15 Jan 2010 09:19 AM

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UAE food stockpiling may affect Iran supply

UAE to build 3-month food stockpile to cushion against supply disruptions.

The UAE plan to build a three-month food stockpile to cushion against supply disruptions may impact supplies to Iran, an Iranian official said on Thursday.

Last month, the UAE announced that under the first phase of a plan to bolster food security that it would build up stockpiles of 15 commodities to cover three months' consumption. Stockpiling has begun, food traders said.

The UAE is a principal supply route for the Islamic Republic, which is just across the Gulf waters.

"Because of this stockpiling here today there are not enough surplus commodities that could be shipped to Iran from the UAE," said Ali Pashang, chairman of the Iran Trade Center in Dubai.

If Iran needed more foodstuffs, it would have to increase imports from countries such as India and Brazil rather than depend on supplies from UAE traders, he said.

"The advantage of Dubai is that its close," he said. Shipments from Dubai to Iran would take hours, rather than the weeks that orders from source countries would take, he added. Dubai has long been a big supply source for many types of goods destined for Iran.

The plan to stockpile food had been well received by traders who prefer to minimise dealings with Iran due to red tape and other factors.

"It's a tough market and with high tariffs, delays at ports and some late payments from traders there it's just not worth the effort to export to Iran," said a Pakistani rice trader based in Dubai.

In November, Iran raised the import tariff for basmati rice to 45 percent from four percent, to protect the local prices.

"Because we had a good harvest in Iran the government wants to protect farmers profits from the cheap rice that comes from abroad and the tariffs will be reviewed once we need more imports," said Pashang.

Iran's top legislative body approved a plan to phase out food subsidies on Wednesday.

The plan would have little impact on citizens as Iranians with low wages would be compensated, Pashang said. The measures were long overdue, he added.

"This subsidy reform should have taken place eight years ago because the rich were the ones benefiting from it, now the ones with limited income will be directly compensated with cash," he said.

Iran's state media said the government will open bank accounts for 36 million people to give them cash to compensate for the higher food and energy prices.

Critics believe the government's subsidy reform plan would hurt many ordinary Iranian people already struggling to cope with rising consumer prices. The official inflation rate stands at around 7 percent, down from a 2008 peak of nearly 30 percent. (Reuters)

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