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Iran Economy Update
Issue 60/2017 WEDNESDAY JUNE 7ST
Tensions in Qatar’s relations with Arab nations; implications for Iran’s economy An Iranian official in charge of export affairs said the dispute between Qatar and the Arab states provides an “exceptional”
opportunity for Iranian economy, Mehr news reported on Tuesday. Mohammad Lahouti, the chairman of the Iranian Export Confederation said the tension has opened a $4-5 billion market to Iran, and urged utilizing this opportunity before it slips away.
From an economic point of view, said Lahouti, this dispute could be of high importance to the regional countries as well as Iran because Qatar used to import about
$4-5 billion worth of food items from Saudi Arabia and the UAE. On the other side, Iran has much potential in providing food and other items Qatar may require. “Meanwhile, Qatar has proximity to Iranian borders, and from the three Iranian main ports of Bandar Abbas, Lengeh, and Boushehr, goods can be shipped to this country in less than 12 hours,” added Mr. Lahouti. “Based on this fact, the rupturing of relations between Qatar and the regional Arab nations will boost Iran’s exports,” he added. Mr. Lahouti said after the UAE, Qatar is the second country in the region that has appropriate port and transit infrastructures and can be among Iran’s top economic partners and even replace the UAE.
In an interview with the daily Shargh, Hamid Hosseini, a member of the Tehran Chamber of Commerce, Industry & Mine (TCCIM) and director general of the Iran-Iraq Joint Chamber asked the government to urge the private sector to move towards Qatar and use the opportunity of the recent tensions to revive Iran’s economic relations with Doha.
Hosseini explains that not only Iran can use this opportunity to export vegetables, dry fruits, saffron, caviar, carpet as well as engineering services, but it can establish
long term energy relations. In this way, he explained, Qatar can use Iran’s pipelines and infrastructures to export its natural gas to Europe via Turkey, and also utilize Iran’s air and sea transport capacities.
The economic daily Donyay-e Eghtesad has dedicated the front page of its Wednesday edition to the “Qatari market’s new opportunities.” Increasing the export of non- oil goods such as food, metal and chemical products, developing energy sector cooperation, making joint investment, boosting cooperation of private sectors, tourism, and agricultural sector collaboration were the areas the daily proposes for developing cooperation. “Qatar is a small country in the Arabian Peninsula the only land border of which is with Saudi Arabia and its other borders are sea borders namely with Iran, Bahrain and the UAE.
Now that the five Arab nations have cut air, land and sea travel, Iran is the only country that connects Doha to the world, which can turn into a great opportunity for Iran to provide what this Arab country needs.”
Donyay-e Eghtesad has published a table which shows the volume of trade between Iran and Qatar from 2001 to 2015, which shows increase from $53.7 million to $143.5 million, and underscores that although the current trade volume is little if being compared with the Iranian total foreign trade value, there is a great potential to increase the figure to about $5 billion.
In a related development, Rahmatollah Mahabadi, the managing director of Iran Airports & Air Navigation Company said with the escalated tensions between Qatar and some of regional countries, the Iranian flight traffic has increased by 100-150 weekly, Tasnim news agency reported on Tuesday.
Also, Shargh daily wrote that following the
2 imposition of flight ban placed on Qatar Airways, the Civil Aviation Organization of Iran has accepted the ICAO’s request to provide air services for Qatari airlines.
Mehr news agency wrote that the Iranian Airport & Air Navigation Company can make more than 51 billion tomans ($15.7 million at the official exchange rate) in the next month from providing such services. An unnamed official from the company has told Mehr that currently, a total of 955 foreign flights range over Iran’s airspace per day and the number may increase by 200 flights if Qatari airlines decide to pass through the Iranian airspace.
WB predicts 4 pct GDP growth for Iran in 2017
In a report released on June 5, the World Bank estimates an economic growth rate of 6.4% for Iran in 2016, up from -1.8% in 2015, but projects that the rate will decline to 4% in 2017. The WB also predicts that Iran’s economy will grow by 4.1 and 4.2 percent in 2017 and 2018, respectively. The report titled “Global Economic Prospects,”
cites Iran as the second largest economy in the region and explains that the two factors of limited spare capacity in oil production as well as difficulty in accessing finance will push down economic growth rate in the country to 4% in 2017. The report also refers to the US sanctions against Iran imposed in early 2017 and states that it may deter foreign investors’ confidence.
In December 2016, the International Monetary Fund (IMF) had estimated that higher oil production and exports would allow Iran’s real GDP growth to rebound to 6.6% in 2016, and that the rate would ease to 3.5% in 2017 as oil production normalizes and non-oil sector growth remains modest.
Iran’s GDP rate projection according to IMF and WB estimates
2016 2017 World Bank 6.6% 4%
IMF 6.4% 3.5%
Indeed, the dominance of the oil sector in the wake of the implementation of the nuclear deal was the main reason for the accelerated pace of GDP growth rate in Iran in 2016. Last year, Iran managed to almost double its oil production1 and exports and raise them to the pre-sanctions levels.
However, since no further robust jump is expected to happen in Iran’s crude oil output and exports in 2017, the country’s GDP growth would relatively be modest in 2017, and as estimated by the WB and IMF, would hover around 4%.
The Statistical Center of Iran announced on 29 May that the country’s GDP growth in 2016 was 8.3%, while non-oil GDP grew by 6.3%.
Iranian and Russia deputy Energy ministers sign cooperation roadmap The Iran-Russia cooperation roadmap was signed in Saint Petersburg on Saturday between the Iranian deputy Petroleum minister and Russian deputy Energy minister, ILNA reported. The document was signed on the sidelines of the annual ST.
Petersburg International Economic Forum June 1-2, which was participated by senior executive managers from the Iranian ministry of Petroleum, NIOC, NIGC, Tavanir Co, and Iranian Thermal Power Plant Holding Company. On the sidelines of the event and in an interview with a Russian news agency, Deputy Petroleum Minister for Int’l & Commercial Affairs Amir-Hossein Zamani-Nia explained that the purpose of this agreement is establishing cooperation for join investment in projects. Zamani-Nia said seven Russian companies have shown interest in developing nine Iranian oil and gas fields some of whom have already submitted the Master Development Plan (MDP) for the projects. Zamani-Nia said
1 Iran’s current production level of crude oil is 3.8 million bpd, and 350,000 bpd will be added to the country’s production capacity by March 2018 but at the same time, a number of aging oil fields that are in the 2nd half of their life span are expected to lose 300,000 bpd of their production by then.
3 chances for cooperation between Iranian and Russian companies in energy sector are high.
Iran’s Road ministry official denies American Treasury official’s comment has deterred Boeing and Airbus from Iran deal
The vice minister of Road & Urban Development rejected the claims that the recent comment of a US Treasury official on reviewing Iran aircraft licence has made concerns for Airbus and Boeing about their deal with Iran.
On May 24, US Treasury Department Head Steven Mnuchin said licenses for Boeing Co and Airbus to sell aircrafts to Iran are being reviewed, and promised to “use everything within our power to put additional sanctions on Iran, Syria and North Korea, to protect American lives” according to Reuters.
In an interview with the Thursday issue of the daily Shargh, Asghar Fakhrieh-Kashan, the vice minister of Road & Urban Development ensured that the US cannot revoke the license for Boeing and Airbus to sell airplanes to Iran, and underscored that the licence was issued under the Obama administration and cannot be invalidated until 2020. “Hence, rescinding the license by the US Treasury would mean breaching the JCPOA in which, the US has explicitly assured selling aircrafts to Iran,” said Fakhrieh-Kashan. He however said with respect to the antipathy the US has shown towards Iran, this country is likely to
“illogically” put rustications in selling aircrafts to Iran. Fakhrieh-Kashan said he hopes the European countries would evade a potential restriction. The Road ministry official said such remarks made by the US Treasury official may have been designed for domestic American consumption.
Similarly, Maghsoud As’adi-Samani, the secretary of Iranian Association of Aviation Company told Shargh daily that reviewing the license for selling aircraft to Iran by the
US Treasury is a breach of the JCPOA commitments.
Former influential lawmaker criticizes confidentiality of Automobile sector deals with foreign carmakers
In an open letter to First Vice President Eshagh Jahangiri, the former influential and conservative lawmaker Ahmad Tavakkoli criticized the new car manufacturing contracts with foreign automakers and called for a serious revamp of the contractual terms. The letter, published by Tasnim news agency, criticized the government for keeping the contractual terms confidential, arguing that it paves the way for the entry of corruption risks.
Tavakkoli refers to some “credible reports”
about the content of the contract which indicate that they don’t secure national interests.
Along with criticizing the confidentiality of the contracts, the former lawmaker argues that “the most embarrassing weak point in the car manufacturing contracts with foreigners is the not attainment of the domestic sector share in producing car, and having the domestic sector’s share remained to the production of the parts that don’t require any specific technology know-how.” Tavakkoli who runs a NGO named the Justice &
Transparency Watch believes that under the contracts the government signs with foreigners, the transfer of technology is not realized. He says most of the country’s 49 car manufacturing companies are currently assembling cars. “This is the true picture of an industry that after 50 years since its establishment, is still waiting to attain modern technology knowhow,” wrote Tavakkoli. He believes that the contract Iran Khodro and Saipa have signed with Peugeot Citroen will end up with French company’s dominance in Iranian car market and enable them to make whatever decision they see fit for price and market conditions.
Of note, in late January, Ahmad Tavakkoli had issued another open letter to Eshagh Jahangiri and asked for the purge of Mohammadreza Nematzadeh, the minister of
4 Industry, Mine & Trade and accused the minister of being involved in corrupt deeds.
Iran’s oil exports to Asia and Europe exceeds 2.2 million bpd: Shana news Shana, the petroleum ministry’s news agency on Tuesday published a report on the diversification of Iranian oil customers post-sanctions. The news agency wrote that in May, Iran’s oil exports to Europe and Asia (Korea, Japan, India and China) have increased by 300% and 40%, respectively.
According to Shana, Iran currently exports about one million barrels per day of oil to Europe, and 1.2 million barrels per day to the four major Asian customers.
According to the latest statistics of the CBI, Iran’s production of crude oil in autumn 2016 reached 3.963 million barrels per day, which is close to the pre-sanctions level of 4.106 million bpd in 2005.
Iranian Touring & Automobile Club attends KOTFA
The managing director of Touring &
Automobile Club of Iran said the Iranian representatives participating at the Korea World Travel Fair 2017 (KOTFA) held negotiations with their Korean counterparts to attract tourists from this country.
According to the public relations office of the Touring & Automobile Club of Iran, Morteza Haji said he is hopeful that such talks yield result in increasing the number of Korean tourists visiting Iran. On the sidelines of the fair, Haji held talks with managers of Korean Mega-Tours and discussed developing tourism cooperation.
