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Iran Economy Update
Issue 37/2017 MONDAY MARCH 27RD
Supreme Leader calls on Govt. to address employment and national production in 1396
In his Nowruz message to the Iranian people on March 20th, Supreme Leader Ali Khamenei cited economic and livelihood hardships as the “bitter memories” of the last Persian year engulfed the middle and lower classes of society. “The bitterness of the people having been plagued by high prices, unemployment, and social harms,”
said the Leader, adding that “Since I am aware of the problems people are suffering from, I sense the bitterness with all my heart.” He said to address such problems, he [for the second consecutive year] puts the label of „Economy of Resistance‟ on this new Iranian year.
Of note, it is a tradition that in his Nowruz message, the Supreme Leader names the New Year in order to emphasize on the main direction towards which the country‟s main policies should move during the year.
“I had named the last year (1395) as the year of „Economy of Resistance, Action and Deed‟ and asked the government officials to establish a command force to carry out the
“action and deed”. Good measures were taken the report of which were delivered to us but what was done was far away from what we and the people were expecting.”
“I name this year as the year of „Economy of Resistance: Production-Employment’.
It means the Economy of Resistance is a general concept and all should focus on production and employment.”
The Supreme Leader‟s Nowruz massage is usually followed by a public speech he delivers in the City of Mashhad at the shrine of the 8th Shiite Imam on the first day of the New Year (March 21st). During his Tuesday
speech, the Leader accused the “enemy” of trying to target the Islamic Republic through exerting economic pressures on the people to disappoint them from their leaders.
“In its extensive propaganda against the Islamic Republic, the enemy is trying to attribute economic and livelihood shortcomings to the Islamic Republic leadership and create the impression that the Islamic establishment in Iran is not able to address economic problems of its people.” The Leader provided some statistics to show what he described as the
“outstanding progresses” achieved by the country after the 1979 Islamic Revolution in Iran and compared some infrastructure developments figures with the ones under the former regime.
He referred to a six-fold increase in the country‟s road networks, a 20-percent increase in the country‟s port capacity, a 30- percent increase in the country‟s dam storage capacity, a 14-percent increase in electricity production capacity, a 30-percent increase in petrochemical production capacity, a 15-percent increase in steel production capacity, the 25-percent increase in the number of university students, the 16-percent increase in the number of scientific papers, and the
“astonishing progress” in the country‟s defense systems as “only parts of the progresses” the country has made after the 1979 Islamic Revolution.
The Supreme Leader admitted some deficiencies but underscored that they should be attributed to the malfunctioning of some “motiveless” managers and not the Islamic Republic establishment as a whole.
He said that the country‟s problems are not unsolvable and can be addressed by the
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“religious, revolutionary, and efficient”
managers.
Also, a major theme of Mr. Khamenei‟s last Tuesday speech was focused on economic issues and his implicit expression of concern and dissatisfaction with the economic performance of the Rouhani government, who seeks re-election in May.
“The country is facing large economic gaps”, he said, and specifically referred to the unemployment of the graduate youth along with economic problems facing the poor and average families. “The surveys show that the measures the government took to emerge the SMEs1 out of recession made some progresses but not commensurate with what was spent on them,” he said in another part of his speech.
“Realizing the objective of boosting national production hinges upon the three prerequisites of human resource, capital, and advanced tools (technology),” said the Supreme Leader, and explained that these three factors are in existence now in the country either in actual or potential
forms. He cited the human
resource capacity of having 5 million university students, 10 million university graduates, and 33 million youth workforce, along with abundant natural resources as a
“great asset”.
“Some of the country‟s economic indices are good and some are bad. While the inflation rate has reduced, unemployment rate has increased, and while a positive economic growth rate has been achieved, the investment growth rate is negative, and while we‟ve made progress in the oil sector, the mining and housing sectors are in recession.”
“Under such conditions, the most important priority to resolve the economic problems is boosting national production and domestic production,” he said.
1 Small and medium enterprises
The Leader expressed dissatisfaction with what he described as the “racing for showing off foreign brands” and said scattered savings should be used to flourish talents. He said the importation of the goods that are “sufficiently” produced domestically should be deemed as Haram (forbidden by the Islamic Sharia).
Mr. Khamenei rejected the assertion that the country lacks sufficient capital for investment, and said the National Development Fund (NDF) in which more than 20% of the oil revenue is being deposited annually is “the best way to wean the economy off oil income.” He also rejected the assertion that the country lacks modern technology for boosting national production. “I say those Iranian young men who managed to boost homemade uranium enrichment levels from 3.5% to 20% in a short time, and the ones who managed to do masterpiece in manufacturing advanced missile and defense equipment will also be able to manufacture advanced technologies for homemade products as well.”
The Leader also expressed dissatisfaction with the limited number of the country‟s export targets, which to him is against the policies of the Economy of Resistance policies, and called for diversifying the country‟s export destination countries.
In his Nowruz message, President Rouhani briefly defended his economic achievements
In keeping with an every New Year tradition, President Rouhani delivered his own Nowruz message on March 20th that was aired by the national TV after the message of the Supreme Leader. Mr. Rouhani took the occasion to defend his administration‟s economic performance in 1395 saying in this year, the production of some products such as oil and condensates grew twofold and by extending loans, 24,000 stagnant or semi-active enterprises revived their operations. He said that after 11 years, the country achieved an economic growth rate
3 of 8% in 1395. “What we achieved last year in reducing inflation, registering economic growth, and creating jobs was unprecedented in the past 25 years,”
boasted the president.
NIOC President says first oil project tender to be held before April 20
In an interview with the Persian-Language Seda Weekly magazine before the Nowruz holidays, NIOC Managing Director Ali Kardor said that the first international oil tender, that will most probably be on developing the South Azadegan oil field, will be held in the Persian month of Farvardin (21 March- 19 April) at the latest.
He said that so far, Indonesian Pertamina and Russian Lukoil have separately conducted technical studies on developing the Ab-Teymour oil field, Japanese Inpex, French Total, Royal Dutch Shell, and Chinese Sinopec and CNPC have separately conducted technical studies for developing the South Azadegan oil field, and German Wintershall has submitted the result of its technical studies on developing the Band-e-Karkheh oil field. Also, Total has submitted the results of its technical studies for developing the South Pars phase 12 gas field. No discussions have yet been held on financial issues, he said.
“I do believe that if we are going to maintain our market share within OPEC and materialize the objectives of the 6th Development Plan (2017-2021), we have to move towards advanced technologies, increase the recovery rates of oil and gas fields, and attract investment. With a debt of above $50 billion, NIOC cannot realize the investment objectives stipulated in the 6th Development Plan,” said Kardor.
He warned that if sufficient investment is not made in Iran‟s petroleum sector, our oil production will decline by 1.5 million bpd in the course of 20 years and the country will lose its OPEC market share.
Kardor said that tenders will be held for the contracts that more than one IOC has submitted technical proposal, such as the South Azadegan project. But some contracts, such as the one for developing South Pars phase 11, will be signed without going through tender procedures. He expressed doubt that the contracts that require holding tender be signed before the upcoming presidential elections in Iran in May, but the story would be different for the ones that are scheduled to be signed without tender procedures.
Kardor confirmed that major foreign banks still decline to cooperate with NIOC but added that “A good feature of the new oil contracts [known as IPC] is that as soon as being signed by the foreign company, it will make them committed to bring a credible bank to conduct money transactions.” He explained that Total, for example, will bring German banks, without giving more details.
Kardor said Iran‟s average export of crude oil in February reached 2.298 million bpd, that if being combined with the 700,000 bpd export of condensates, an unprecedented figure of 3 million bpd export will be observed. He said Iran‟s average export of crude oil for March will be 2.240 million bpd, along with an estimated condensates export of about 550,000 bpd. According to Kardor, the coutnry‟s oil production on March 7th (the interview date) reached 3.881 million bpd and will reach 4 million bpd by mid April. Kardor said Iran currently exports 500,000 bpd of oil to Europe but NIOC hopes to increase the level to 800,000 bpd in two months.
Kardor confirmed that the problem for transactions of oil money to Iran has been resolved. A portion of the money we were owed by India has remained unpaid that will be cleared by the end of March. “We are also owed some $2.5 billion in debt by a number of Greek and other small companies,” he said.
