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Iran Economy Update
Issue 100/2017 MONDAY DECEMBER 4TH
Content:
President Rouhani gives 100-day report on his administration‟s achievements
President Rouhani inaugurate the 1st phase of strategic Chabahar Port
TCCIMA official urges CBI to take countermeasures to minimize damage of CATSA sanctions
Europe took 40 pct of Iranian crude in November, up from 24 pct in October
RAI signs €720mn finance deal with Korean Hyundai Rotem for rail-bus building
Iranian banking-trade delegation visits Madrid
Three economic cooperation agreements were signed between Iran and Hungary ---
President Rouhani gives 100-day report on his administration’s achievements
The Presidential office has recently published a report on the main activities of the Rouhani administrations during the first 100 days in office in the second term. The report entitled “The 100-day report” comprises three primary sections namely (1) the measures taken in the macroeconomic sector, prepared by the President‟s economic adviser, (2) the cultural and social sector, prepared by the presidential office‟s strategic research center, and (3) the measures taken by the government‟s executive bodies, prepared by the Management & Planning Organization (MPO). President Rouhani has been under pressure for failing to eradicate poverty and improving the coutnry‟s ailing economy and this report is believed to have been prepared in order to allay such criticisms.
“The government’s main agenda in this year is maintaining economic stability, utilizing the extensive capacities of the private and cooperative sectors, and activating the country’s huge unused capacities in the economic sector. In line with the objective of utilizing the unused capacities in the economic sector, the CBI will allocate 55 trillion tomans in loan facilities in order to spur growth and employment in the economy,” reads the report.
As you see below, against the title this report carries, which one expects hearing about the measures taken in the first 100 days of the administration in office, the report is indeed about what the Rouhani government has done during the past five years. In what follows, a brief translation of the report on the economic sector is presented:
2 oil and gas
sector
The export of oil and condensates in the first seven months of 1396 averaged 2.6 mm bpd. Also, gas production capacity from the South Pars field surged to 575 million cubic meters per day
Completing a deal [with France‟s Total] for developing South Pars phase 11 Following up on signing nine oil and gas deals by this yearend
Following up on signing a deal with Oman for producing LNG
Launching SP phases 17, 18, 19, 20, & 21 which led to a 170-million cubic meters per day increase in gas production Industrial
sector
Increasing the commercial vehicle production by 20.6%, petrochemical productions by 7.2%, raw steel by 9%, and home appliance by 11.35%
banking relations
Developing banking relations and signing finance contracts with European and Asian banks totaling $21.2 billion
Negotiations with some countries for signing „Currency Swap Agreements‟
macro economy
Pulling the economy out of recession and putting it in a non-inflationary boom path so much so that in 2016, for the first time in three decades, the economy witnessed a double digit growth rate. Also, in the 1st quarter of 1396 (spring 2017), all the economic sectors witnessed positive growth rate.
Unemployment The unemployment rate for the youth aged 15-29 dropped by 2.3 percentage point in summer 2017, and reached 24.4% from 26.7%. Also, the general unemployment rate dropped to 11.7% in summer 2017, from 12.7% a year ago.
Allocating $1.5 billion directly, and $1.5 billion indirectly to the projects for creating jobs in the rural areas
inflation The government continues to achieve success in taming the inflation rate and keeping the rate low as during the first seven months of the current Iranian year, the rate remained in a single digit realm.
oil revenues The share of oil revenues in total budget has declined from 41% to 26%, while the share of tax income has risen from 33% to 36%. During the first seven months of 1396, the oil export proceeds have grown by about 71% compared with the similar period of the last year.
non-oil exports In summer 2017, the country‟s non-oil exports value (condensates included) has increased by 6.6% compared with similar season in 2016.
The report states that in line with implementing the Economy of Resistance policies introduced by the Supreme Leader, five separate packages have been drawn up by the Economy of Resistance Taskforce for being implemented in the currency Iranian year (1396), some general objectives of each are summarized in the following table. The five packages include (1) the package of enhancing national production capabilities (2) the package of finance and investment (3) the package of attracting, developing, and deepening the technology, (4) the foreign trade package, and (5) the employment package
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Package Details
Package on
enhancing national production
capabilities
Reviving 10,000 industrial and mineral production enterprises
Completion and launch of 6,000 industrial and mineral projects that have made above 60% progress
Developing investment in large/key export-oriented industries, downstream mineral industries, and the strategic mines Increasing crude oil production capacity to 4 mm bpd by March 2018, with a focus on the shared fields, and also increasing condensates production to 683,000 bpd by the same time
Concluding ten oil and gas contracts [with IOCs]
Increasing production from the western shared oil fields (North & South Azadegan, Yadavaran, and North & South Yaran) to 310,000 by March 2018
Bringing South Pars phases 13, 14, and 22-24 on stream by March 2018
Increasing the production of essential, necessary and strategic goods in the country
Enhancing efficiency of power plants, completion &launch of new plants in collaboration with private sector
Package on attracting foreign finance and investment
Attracting $15 billion foreign investment in 2017 with priority given to the countries that possess advanced technology allocating funds from the National Development Fund (NDF) to the SMEs to renovate and upgrade their machineries and equipment
Taking $20bn foreign loans to finance production & development projects in the governmental and private sectors Supporting 150 advanced industrial enterprises and knowledge-based companies in this year to increase the share of high-tech products in total industrial products to 39%
commercializing the manufacturing of ten petroleum industry equipment in the country by the private sector Absorbing,
developing, &
deepening technology
upgrading the coutnry‟s customs system and equipment and enhancing its efficiency, imposing limitations on the importation of unnecessary goods or the ones that are sufficiently produced in the country
Package on foreign trade
Developing the exports of the country‟s top 20 non-oil products in a way that by the end of this year, the weight of non-oil exporting goods increases by 30% compared with the previous year
Accelerating the pace of construction and launch of the country‟s most important rail lines and transit routes with priority given to the routes that have links with the Asian Highways (AH) and the Trans-Asian Railways (TAR)
Developing plans for increasing trade with the countries neighboring to the Iranian free industrial and trade zones in a way that the export of the Iranian sides in such transactions is increased by 25%.
Package on employment
implementing the “comprehensive employment plan” aimed at creating 970,000 jobs in 1396
4 President Rouhani inaugurate the 1st phase of strategic Chabahar Port
On Sunday, President Rouhani attended a ceremony to inaugurate the first phase of the project for developing the Chabahar Shahid- Beheshti Port and said “Today is a historical an blessed day for Iran and Chabahar.” He said this port is located in a position that can give the North-South corridor an access to the Atlantic Ocean, and it is important from this perspective, Mehr news agency reported.
This corridor is of economic importance because goods are delivered to the neighboring countries in shorter and more appropriate time, and gives our eastern neighbors such as Afghanistan, and the northern countries such as the central Asian nations an access to the South and to the ocean. From a political vantage point, said Rouhani, this corridor is also of high importance because in future, it provides us with a connection with the eastern and northern nations and even with the European countries, and this issue is of high importance to us. Moreover, this port is important for the Sistan and Baluchistan Province especially after it is connected to the coutnry‟s nationwide railways. “Chabahar can connect the regional countries together and secure their common interests,” added Rouhani, who named the port as the “Gate for the nations”.
The daily Shargh wrote that Minister of Road & Urban Development Abbas Akhundi who accompanied Rouhani in his trip to the country‟s southern eastern area said “our motto in this region is establishing relations with all the neighbors, and we’re not going to monopolize Iran’s geopolitical position. Rather, we are willing to have all the friendly nations use this situation.”
“Different corridors can access the ocean through this port. This is the port for which we started cooperation first with India, which brought $85 million and $150 million in fund in two stages. But more than investment, we think about cooperation. So far, more than
$350 million has been invested in this port. The agreement signed between Iran, India and Afghanistan [signed in May during the visit of Indian Prime minister] has been approved by our Parliament, and the South-West corridor agreement was last week signed in Georgia which is a step forward. The next step is developing the Chabahar Port’s communication routes and to this end, we seek laying railways from Chabahar to Birjand, which would be a very strategic rail line. We also seek improving the road services between Chabahar and Zahedan and making its two-laned,” said Minister of Road Akhundi, according to the daily Shargh. “We’re going to turn the Port of Chabahar into a modern port and competitive with other ports in the world,” he said, adding that our policy is establishing 450 hinterlands there to provide logistic services and doing economic, industrial and production activities there.
Mehr news agency wrote that the oceanic Port of Chabahar is among the important and strategic transit and transship points of Iran which establishes a link among the south eastern, Asia, east of Africa, Afghanistan and the Central Asia. The launch of the first phase of this port increases its cargo handling capacity from 2.5 million tons to 8.5 million tons. Some $1 billion has been spent on implementing the first phase of this project, according to Mehr news, and four other phases are required to be completed in future in order to increase its total cargo handling capacity to 82 million tons. Given the strategic importance of this port, wrote Mehr news, ministers and ambassadors of 17 countries attended the inauguration ceremony on Sunday.
On 4 September this year, the Sistan-Baluchistan Province‟s Port & Marine Organization director general had said developing this port is one of the coutnry‟s most important development projects in recent years. According to Tasnim news, Behrouz Aghaie said
5 the operations for developing this port started in 2007. He explained that for developing the first phase of the project, some $1 billion has been spent of which $300 million were procured from the Port & Marine Organization‟s resources, $403 million from the National Development Fund (NDF), and $235 million was brought by the Indian investor. Mr. Aghaie explained that to pay its financial contribution to the project, India opens a $150 million line of credit and it also has a $85 million worth 10-year operatorship contract with Iran for equipment purchasing. The short maritime distances, its distance from the crisis-hit Persian Gulf region, and its immediate hinterland of over 300 million population in seven countries surrounded by land were among the Chabahar Port characteristics Aghaie cited to stress on the importance o this region. These specifications have made the oceanic port of Chabahar into the best transit and transship route for export to and import from the CIS countries, east of Africa, and the horn of Africa, added Aghaie, according to Tasnim news.
Reuters on Sunday reminded that “India has committed $500 million to the Chabahar port on the Gulf of Oman which is Iran’s closest to the Indian Ocean and would allow it to bypass rival Pakistan. But New Delhi has proceeded cautiously at a time when the U.S.
administration has taken an aggressive new approach toward Tehran.”
Of note, the project for developing the 1st phase of the Shahid-Rajaie Port was carried out by the Khatam-ol-Anbia Headquarters, the engineering arm of the IRGC. The Chabahar Port has two main ports of Shahid Beheshti and Kalantari.
The project inaugurated on Sunday was indeed the first phase of a larger project for developing the Mokran coasts, which is of strategic importance for the Islamic Republic. In order to understand the importance of the Mokran coasts for Iran, let‟s remember that Supreme Leader Ali Khamenei who rarely leaves Tehran visited Bandar Abbas and the Mokran regions in 2011. Vice President Eshagh Jahangiri declared in January 2017 that “The Supreme Leader in his visit made the remarks that drew the attention of the country’s officials to this region as one the biggest opportunities for the country’s development. Since then, a long term and ambitious development plan has been drawn up for this region.” Jahangiri was speaking was speaking during a ceremony on 23 January during which, Iran and foreign investors from Korea, Oman, China and India signed seven MoUs totally worth $3 billion on investment for developing the Mokran coastal zones. The agreements were signed on the sidelines of the Mokran Investment Opportunities Conference (23-24 Jan, Chabahar, Iran).
TCCIMA official urges CBI to take countermeasures to minimize damage of CATSA sanctions
A TCCIMA official confirmed that the US Countering America‟s Adversaries Through Sanctions Act (CATSA) has affected the Iranian economy and urged the CBI to take countermeasures to mitigate the effects. In an interview with Mehr news agency on Sunday, Hossein Salimi, the TCCIMA Investment Commission‟s vice president said that such sanctions have set a sense of despondency in the contracts already signed between Iran and foreign countries. Salimi confirmed that in the past weeks countries like Turkey, UK and the Emirate of Sharjah have blocked the accounts of non-resident Iranians. “Our perception was that sanctions are gone but they’ve imposed new ones, and I think the rein of sanctions will be tightened,” said Salimi. He urged the CBI to start negotiations with the Iranian trade partners to use local currencies for their transactions. “Such damages will be minimized especially, if countries like
6 India, Turkey, Korea and China accept using local currencies. Such negotiations have already started with China and Turkey,” he said.
Europe took 40 pct of Iranian crude in November, up from 24 pct in October
The Iranian Petroleum Ministry website reported on Sunday that in November, about 40 percent of the Iranian oil eas destined for Europe, while 60 percent were delivered to the Asian customers. Shell, Royal Dutch Shell, Total, Eni, Saras, Hellenic Petroleum and Repsol were the major European customers of the Iranian oil, according to Shana news agency. In this report, South Korea has been cited as the largest customer of the Iranian condensates, as almost half of the Iranian 400,000 bpd of exported condensates were delivered to this country in November. The following table shows the volume of Iran‟s crude oil exports to its customers in October and September 2017. A simple calculation draws one to conclude that in September and October were 32% and 24%, respectively, and hence, November marked the first month after sanctions in which the volume of Iran‟s exports to this continent surges to 40%.
Vice Petroleum minister Ms. Marzieh Shah-Daie declared on November 20 that Iran has started negotiations to supply crude to new customers in Europe.
October September 2017
m/o/m change %
Asia
China 640,000 625,000 2
Korea 238,000 456,000 5
Japan 218,000 119,000 83
India 377,000 360,000 -48
Taiwan 0 65,000 -100
Total Asia 1,437,000 1,625,000 -9
Middle East UAE 111,000 112,000 -1
Europe
Belarus 26,000 0
Greece 97,000 71,000 37
Italy 129,000 178,000 -28
Spain 32,000 137,000 -77
Turkey 97,000 277,000 -65
other 129,000 173,000 -25
Total Europe 510,000 837,000 -39 Total crude & condensate exports 2,094,000 2,573,000 -19
Source: Reuters
7 Iran’s foreign economic relations
Iran – Korea
RAI signs €720mn finance deal with Korean Hyundai Rotem for rail-bus building
A tripartite contract for building 450 rail bus locomotives was signed on Saturday between the Islamic Republic Railways (RAI), Korean Hyundai Rotem and IRICO (the Iranian Rail Industries Development Company). The 720-million-euro contract which was signed in front of the Minister of Road & Urban Development and the Korean Ambassador to Tehran will be implemented in 78 months, and according to the Iranian minister, its implementation leads to the creation of 1,000 direct and 1,700 indirect jobs and the transfer of technology for building rail bus.
In an interview with Fars news on Sunday, Nasser Soufi, the IRICO managing director gave some details about the deal and explained that in an agreement with the Iranian government, the Korean government has provided finance for the construction of rail bus cars for the RAI. According to the agreement, a portion of this 720-million worth finance should be spent on manufacturing train cars in Korea, and according to the same agreement, 23% of the finance amount can be absorbed in the finance receiving country. According to the contract, the Korean company will deliver a portion of the produced locomotives to Iran.
Iran-Spain
Iranian banking-trade delegation visits Madrid
A CBI official declared that an Iranian trade-banking delegation has travelled to Spain to follow up on implementing the roadmap for developing bilateral economic relations and facilitating banking relations. According to Mehr news, the Iranian delegation comprises representatives of the government and private sectors in oil & gas, petrochemical, banking, insurance, agriculture, energy, knowledge based products, and nanotechnology areas.
Iran-Hungary
Three economic cooperation agreements were signed between Iran and Hungary
Minister of Economic Affairs & Finance met his Hungarian counterpart in Tehran and the two sides signed three agreements on cooperation in medicine, land transport and establishment of direct flight lines. Karbasian explained that the agreements were on technology transfer and cooperation in manufacturing bus (between Spanish Ikarus Bus and an Iranian company), cooperation and investment in medical equipment and medicine, and launching a direct flight.
