Museveni seeks barter trade with Iran government

President Museveni has proposed barter trade—the exchange of goods for goods and services for services—that would bypass the global banking system, which predominantly uses the United States Dollar as one of the ways of boosting trade with sanctions-hit Iran.

The President mooted the proposal on Wednesday during a meeting at State House, Entebbe, with the visiting Iranian Deputy Foreign Minister for Economic Diplomacy, Dr Mahdi Safari.

“For the general pharmaceuticals, we are ready to work with you in joint ventures for any medicine. The same with the vaccine,” Mr Museveni was quoted as saying in a statement.

On trade, according to the statement, the President said Uganda has got a lot of production of goods, including fresh products, which Iran might be interested in, and the two countries can exchange them in barter trade without going through the dollar.

The Iranian government uses, among others, barter trade with friendly countries in Asia and Latin America to skirt around the thick layers of the US-led sanctions, especially after former US President Donald Trump’s withdrawal from the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA) in 2018.

The Western countries also punish any companies, individuals or governments that deal in sanctioned commodities or individuals.

Drawing US attention

The Uganda-Iran barter trade system would certainly attract scrutiny from Washington, which gives Uganda nearly $1 billion dollars each year, mainly for health and security support.

The State minister for International Relations, Mr Okello Oryem, told Daily Monitor last evening that there is no standard way of trading around the world and by engaging in barter trade, Kampala would not be breaking any international law.

“Of course some people [countries] might not be happy about it but Uganda and Iran have long standing diplomatic relations—we have maintained an embassy in Tehran for a long and they have one here,” Mr Oryem said by telephone.

He added: “The same countries that might not be happy have embassies with other countries we do not agree with, and it is none of our business how they deal with them as long as they don’t break any rules.”

It remains unclear whether the Uganda-Iran barter trade bid was midwifed in the ministry of Foreign Affairs where past lessons from a similar arrangement with Cuba in the mid-1980s are raw.

During the scarcity of essential commodities of the mid-1980s—following years of political turbulence from 1966 to President Obote’s removal in 1971 to the economic collapse under President Amin to the 1980-86 rebel war—the then new National Resistance Army (NRA) government embarked on barter trading with Cuba, in the northern Caribbean Sea, which had been and remains under heavy US sanctions.

The proposal, according to accounts, was fervently supported by the then run-off the mill President Museveni who professed Marxist ideals during the 1980-86 rebel war against the Obote II government.

Consequently, an inter-ministerial committee in the ministry of Foreign Affairs led by the late Ambassador Eldad Wapenyi was established to advise the government on how to barter trade with Cuba. Like in Iran’s case, Uganda would export mostly agricultural produce to Havana in exchange for essential commodities such as sugar and soap.

Past experience

Ambassador Wapenyi, who served as Uganda’s UN Permanent Mission in New York in the early 1970s, attempted to advise the NRA government but his thoughts were dismissed. The barter trade failed. The reasons are several, depending on who one talks to.

Some sources say the consignment of produce Uganda sent to Havana was found substandard; the beans and g-nuts contained weevils and were returned. Other sources say the Americans and Britons who supported the NRA Bush War thwarted the deal. Last evening, Mr Oryem said: “Of course there are some lessons we learnt from the account you are talking about and this time we will deal with it better.”

The NRA government eventually gave up on trading with Cuba. In 1987 they cozied up with the Bretton Woods Institutions—World Bank and IMF—leading to embracing their neo-liberal agenda of structural Adjustment Programmes, including liberalisation of the economy and privatisation. 

Ambassador Harold Acemah, the former deputy head of Uganda’s diplomatic mission in Brussels, told this newspaper separately that “as a country, we should learn from the mistakes of our past.”

“Unless one has short memory but as long as we are fairly on good terms with the Americans this is something they will not take lightly,” Ambassador Acemah said. “Barter trade was tried in 1986 with Cuba with disastrous consequences. The beans and other produce Uganda exported to Cuba in exchange for Sugar and other items were returned because our items were sub-standard and did not meet Cuba’s minimum standards.”

Growing trend

According to an article published in April by Presstv, an English mouthpiece of Tehran, Iran’s barter trade system to bypass US and European sanctions has been gaining traction.

Diplomatic sources at Uganda’s Mission in Tehran last evening welcomed the barter trade initiative, saying the country offers a wide market, especially for agricultural products.

In return Tehran would provide Kampala with, among others, technology transfer in agro-machinery, pharmaceuticals, and petro-chemical industry know-how.

“Of course sanctions are targeted, and agricultural products are not among those targeted. But undoubtedly as a small country trying to bypass the sanction regime would attract scrutiny which would come with implications,” one diplomat in Tehran noted.

In April, Iran and Pakistan signed a barter trade agreement in which Islamabad will supply rice to Tehran to get oil in return.

They also have barter trade deals with Sri Lanka. The Iranian Trade Promotion Organisation has listed 1,100 commodity items that can be bartered with African countries.

Last month, Mr Museveni proposed the same barter trade deals to Cuba, which is also under tight sanctions from the United States.

current status

Trade between Uganda and Iran is still low, at around Shs12b annually. Iran exports mineral fuels and oil worth Shs10b while imports coffee and tea to the tune of Shs2b annually.

Iran has previously partnered with Uganda in the health and security sectors. Iranians trained Uganda Police Force officers and also built a hospital for the police. However, the completion of the police hospital project at Naguru was delayed because of international sanctions.

Iran’s developments in Uganda angered the US diplomats in Uganda.  Police sources during Gen Kale Kayihura’s leadership said at one point the US diplomats asked them to cancel the Iranian deal in exchange for the US providing funds for the construction and maintaining a hospital of the same level that Iran had planned. Gen Kayihura allegedly rejected the US proposal.

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