The EU agreed recently to freeze the assets of Iran’s central bank as part of further sanctions aimed at stepping up pressure on Iran’s disputed nuclear program.

The tougher trade embargo has meant major EU banks have pulled back from financing grain shipments to Iran, a major importer of foodstuffs and animal feed.

“The myriad of sanctions have worked to the point where the Iranian banking system is virtually defunct, thereby not allowing international trade houses to receive workable letters of credit,” one European grain trader said.

“Their ships are stopped while people figure out how to get payment done, it’s a mess.” 

Industry sources said a number of international trade houses are unable to deliver their grain at the moment. 

“The exporters cannot unload without payment as they would face multi-million dollar losses if they do not get their money,” another grain trader said.

“People are already facing losses on deals because of the delays in unloading. The importers cannot pay cash as the shipments are too big. It is a total nightmare.”

The delays have meant that sellers of the cargoes have had to pay up to $35,000 a day in costs to ship owners. While some have speculated that cargoes could be diverted, other trade sources said it would not be financially viable given the amount of costs already involved. 

“The demurrage costs are really hurting everyone at the moment. It’s not feasible to find new destinations,” a trade source said.

Demurrage costs are payable to a ship owner by a charterer for a delay for which the owner is not responsible.

Iran imports around 4.5 million tons of grain a year, including about 3.5 million tons of corn, the leading world grain for animal feed, according to International Grains Council figures. It ranks among the top 10 global importers of maize.