Iran Economy Update
Issue 90/2017
SUNDAY OCTOBER 15TH
TSE and Forex market remain unchanged to Trump speech
On Sunday, Iran’s TSE and forex markets shrugged off Trump’s decertifying the nuclear deal as the TSE went up by 0.6 percent compared with last week, and the rial was appreciated versus the US dollar and was traded at 40,200 rials, versus 40,700 rials last Thursday. It remains to be seen if the rial appreciation was because of the market’s inattention to the Trump’s remarks, or due to the injection of additional subsidized hard currency by the CBI.
“The TSE market made a grimace at the Trump’s speech,” wrote Mehr news agency, in reference to the TSE market’s rise on the first Saturday after the Trump’s speech. The economic daily Donyay-e Eghtesad wrote that the foreign exchange market crossed the
“negative excitement of Trump’s remarks” as after a few weeks of tense in the foreign currency market, the rial gained value against hard currencies.
“The market observers cite Trump’s empty words, the EU support of the JCPOA, and the less demand by the risk-averse foreign exchange players as the causes of the rial’s appreciation against hard currencies on Saturday in the market,” wrote Donyay-e Eghtesad newspaper.
In regards to the upward movement of the TSE index, the daily wrote that the
“appropriate reaction of Iran assuaged the concerns and bolstered optimism towards the future.” “Although it was expected that Trump’s decertification of the nuclear deal won’t evoke negative reaction from the TSE, The 0.6 percent rise in the market was surprising to everyone”, added the daily.
The 15 Oct edition of the daily Shargh published an article titled “Total will stay, Boeing will leave,” in which the author weighs on the fate of the contracts with Total, Boeing and Airbus in the wake of the Trump’s Friday speech. “The most important negative impact of the recent US measures could be on the plane purchase financers. If the financers refrain from financing the purchases, Iran may still be able to buy planes from Airbus with the funds provided from the National Development Fund or from the government’s annual budget devoted for renovating the air fleet. But the story with Boeing would be different because airplane companies cannot sell products without permission from their government” wrote Shargh.
Meanwhile, Iranian officials try to ensure the domestic and foreign audiences that the Trump’s decertification of the nuclear deal will have no impact on the country’s 39640
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dollar/rial rate
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TSE index trend
economy and interaction with the international community. Petroleum Minister Bijan Zangeneh told the state TV on Sunday morning that he doubts the Trump’s speech would have any impact on international oil prices. He said the foreign companies that are negotiating oil deals with Iran had anticipated such remarks and so, such statements would affect their works and decisions.
In a related Development, OIETAI President Mohammad Khazaie said on Saturday that negotiations continue with a number of Asian and European countries for opening lines of credit. The 8-billion-euro LC contract with Korea, the 10-billion-dollar LC deal with China’s CTIC, the 1-billion-euro deal with Austrian Oberbank and the 500-million-euro LC with Danish Danske were the deals and agreements the OIETAI head said Iran has so far entered into. According to Mehr, Khazaie also reminded that agreements have been signed with Russia for financing power plant, as well as the line of credit extended by India for developing the Chabahar port. Khazaie also declared that the CBI is in talks with two or three Asian and European countries.
In an interview with Shargh, IDRO President Mansour Moazzami said Trump’s speech was nothing new and cannot put Iran’s oil industry in jeopardy. He said “The Trump’s speech faced a strong denunciation from the European countries and hence not only the JCPOA was not fallen apart, but it was further consolidated.” He however said that
“in a worst case scenario, such American hostile actions can cause foreign banks to act more prudently in money transactions with Iran but it will not have a serious impact on us because major foreign banks already have no transactions with us.” Moazzami speculates that French Total will stay in Iran saying “I think companies like Total have entered Iran with previous planning and weighing on different aspects of their investment in this country and certainly, they won’t leave this country under such circumstances.”
The headline of the front page of the economic daily Jahan-e Sanat reads “the [economic] situation will not get worse”, and the other major headline of this newspaper was on the “Big No” the European countries told Trump.
Donyay-e Eghtesad, the leading Iranian economic newspaper wrote on Saturday that the US President pursues three major objectives in his Iran policy: (1) denying or minimizing Iran’s economic benefits from the JCPOA (2) evoking Iran to quit the JCPOA at the expense of Tehran, and (3) getting rid of a law which obliges him to certify Iran’s compliance to the JCPOA every 90 days.
Shargh daily has also interviewed “a CBI expert” who said the only difference between this and the previous threats of the US is that this time, such threats are associate with a “marginalized America” that in effect, will undo the sanctions. The expert said that by the Persian month of Dey (22 Dec 2017 – 19 Jan 2018) some good news will be announced in regards to contracts in Iranian banking sector that by and large will eliminate many concerns of economic players in Iran.
Tasnim news agency wrote that on the sidelines of the World Bank annual meeting in Washington, Iran’s minister of Economic Affairs & Finance met with his French counterpart. During this meeting, Bruno Le Maire told Massoud Karbasian that developing economic relations with Iran is of high importance for his country and emphasized on the necessity of maintaining the JCPOA. The news agency also quoted Mohammad Nahavandian, vice President for economic affairs as saying that while in the past days, we were witnessing the media’s frenzy about Trump’s Iran comment, we saw that such remarks couldn’t affect our markets. “This showed that the winner in the JCPOA was the Islamic Republic that managed to create fissure among the US and the EU.” “Today, the international private and state think
tanks cite Iran as a one-trillion dollar economic opportunity. We should not forget that Iran ranked first last year in the world in terms of the economic growth rate.”
As discussed above, headlines in Iran have become more salient on the reluctance of the international community to follow the Trump’s line on Iran’s economy. Tasnim news agency has focused on the remarks of IMF Managing Director Christine Lagarde on the fund’s unchanged policies towards Iran and loan extending to this country (click here) and the front page of the economic daily Donyay-e Eghtesad was on the US former secretary of state Hillary Clinton who denounced Trump’s bellicose language towards Iran saying the president’s decertifying “made us look foolish and small [...]”
ILNA news agency has quoted Mohsen Alavi, head of the Economic Security Committee at the Majles National Security &
Foreign Policy Commission as saying that the US seeks creating a frenzied media atmosphere via which disturbing foreign investment security in Iran. “The Americans have correctly realized that our basic problem is in economic field and knows that to eliminate livelihood problems and eradicating unemployment, we need to attract domestic and foreign investment and hence they think to prevent entrance of foreign investment to cripple our economy and create economic and social crises in coming years for us,” said the lawmaker, according to ILNA.
