[SCMP Column] Nuclear Deal Goes Nuts

November 04, 2017

Scratch the surface of Donald Trump’s decision last month to renege on the Iran Nuclear Deal that in 2016 ended decades of sanctions, and what do you find? Pistachio nuts.

So often, high-minded, big-headline global deals have humble, not-so-high-minded foundations, and the Iran nuclear deal provides a superb, if nutty, example.

For thousands of years – back to 6,500BC at least – Iran has been the world’s crucible for pistachio nuts. Not only do Iranians devour them with a passion, at almost every festive opportunity, but anyone anywhere in the world that had heard about, and developed a taste for pistachios, had to turn to Iran. Even through the past century, after crude oil, Iran’s main export has always been pistachios, coming mainly from the south-eastern province of Kerman, famous also for caraway seeds and Iran’s not so awesome auto industry.

Legend has it that the Queen of Sheba decreed that pistachios were for royals only. Nebuchadnezzar, the ancient king of Babylon, is said to have planted pistachio trees in his hanging gardens. And in the first century A.D., the Roman Emperor Vitellius introduced the pistachio to Rome. Moslem legends say that the pistachio nut was one of the foods brought to Earth by Adam. Only two nuts get mentioned in the Old Testament – pistachios and almonds. But for most of recent history, it is Iran that has taken ownership worldwide of the pistachio.

Until 1979 and the Iran hostage crisis, that is. For those of you too young to remember, shortly after the overthrow of the Shah of Iran and his exile to the US, radical Muslim students took over the US Embassy in Tehran and held 52 American diplomats and citizens hostage for 444 days – the longest hostage crisis in recorded history. The crisis cemented the prestige of Ayatollah Ruhollah Khomeini and the political power of Iran’s theocracy, and pushed US President Carter to impose sanctions against Iran.

Thus began four decades of ugly standoff between the US and Iran, and an awful body-blow to Kerman’s venerable pistachio trade. Exports of pistachios were never formally banned to Europe or China (two key markets for Iran’s farmers), and even the US never imposed formal embargoes on them.  But the clamp on access to banks and US$ finance, and to most international shipping, hobbled the trade.

And guess who strode into the gap vacated by Iran’s pistachio exporters? Of course, California’s nut farmers. Not satisfied to dominate the world trade in almonds and walnuts, the opportunity to fill the pistachio breach was undoubtedly welcome. Pistachios only arrived in the US in the 1880s, and even in the 1970s attracted very little interest.

But from the imposition of Iran embargoes to 2015, California’s land occupied by pistachio trees has soared from 19,000 hectares to 94,000 hectares. Not only have they taken possession of the domestic market for pistachios, but they have come to overtake Iran as a global exporter. Today, the US has come up alongside Iran, and together they now account for about 80 per cent of the world’s pistachio trade.

So the Obama deal with Iran to lift embargoes in exchange for an agreement to reign in Iran’s nuclear programme – endorsed by most other world powers and seen by most as a very important step to reduce the massive diplomatic tensions in Central Asia – came as very bad news indeed for California’s pistachio exporters.

Iran’s exporters have promptly bounced back – from overseas sales of 70,000 tonnes in 2009 back up to 165,000 tonnes in 2015-16. And California’s exporters are not happy: “The economic viability of the (pistachio) industry is a risk”, said Richard Matoian, executive director of the US Pistachio Producers.

There is not as yet much concern over their dominance of the US domestic pistachio market – after all, the US has since 1986 had tariffs of over 240 per cent slapped on Iranian imports, to countervail against alleged Iranian government subsidies, and there is no sign that these tariffs will disappear any time soon. But US prospects as an exporter have been put in jeopardy – and have not been aided by droughts over the past two years that have cut production by around 50 per cent.

Iranian exports have recovered to around US$1.2bn a year – out of a global trade worth around US$2bn – and for dollar-strapped Iran, that is no small sum. Demand for all nuts is predicted to grow strongly as their health benefits attract more attention, and pistachios – a relative of the cashew, mangos, sumac and even poison ivy – are seen to be among the most healthful, and the most promising. Bemusingly, researchers have found that the time it takes to break open the infuriatingly reluctant shells, combined with the sight of a growing mountain of shells, results in pistachio-eaters consuming almost half as many calories as consumers of other kinds of nut.

So Donald Trump’s decision two weeks ago to withdraw from Obama’s Iran Nuclear Deal could not be better timed. Trump has called the Iran nuclear deal “the worst deal ever”, but when he said that, I don’t think he had California’s pistachio exporters in mind – though I’m sure there are some votes to be found among those thousands of nut farmers struggling to get access to dwindling supplies of ground water in the Central Valley.

Trump’s primary mission as he prepares to venture into Asia, is to go forth, identify trade imbalances wherever they can be found, and put the world to rights by correcting those imbalances in the US’s favour. Iran may not rank up there among his priority targets. Chinese steel might be a tad more important. But a billion dollars here, a billion dollars there, are unlikely to be ignored.

Iran’s pistachio farmers may not quite count among Trump’s most existential threats, but they are likely to be a target nevertheless, especially as part of “the worst deal ever”. Iran may have been home to pistachios since written records began, but why should that get in the way of making America great again?
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view. Opinions expressed are entirely his own. 
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