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Iran Economy Update
Issue 65/2017 TUESDAY JUNE 20TH
Economy minister meets Korean Eximbank CEO on financing infrastructure projects Iran’s minister of Economic Affairs & Finance met with the chairman of Korean Eximbank and discussed financing Iranian development/infrastructure projects in the energy, petrochemical, oil and health areas, Mehr news agency reported on Monday. During this meeting which was also participated by the representatives of Iranian OIETAI1, CBI and baking officials, the two sides approved the content of an 8-billion-euro line of credit agreement. On Friday, Tayyebnia had ensured that the finance is not sourced from the Iranian oil sale proceeds and rather, is procured from Korean resources. He had said that there were problems in regards to the state of the contract and the guarantee text that the two sides were discussing to resolve.
On the sidelines of the AIIB annual meeting in Korea, Tayyebnia also met with the deputy directors of the Asia Infrastructure Bank and underscored that developing cooperation with the Asian nations and international institutes are of high importance to the Islamic Republic.
According to Mehr news, Tayyebnia said that as the Islamic Republic is completing its membership application, the AIIB sends delegates to Iran to evaluate the projects Tehran has introduced for financing.
Tender for Azadegan project delays for a few month: NIOC director
NIOC Managing Director Ali Kardor said the tender for developing the Azadegan oil field will be delayed and held under the next administration. “The first part of the tender has been held.
We’ve sent invitations to different companies and are receiving their replies. Some companies have shown interests and some declared reluctance.” Kardor said today. He added however that the deadline was initially set at this weekend but it will be extended as some interested companies have requested more time in order to find their Iranian partners, and some others said they need three to four months to finish studies on the field. Kardor made the comments on Tuesday after a ceremony to sign an agreement with Italian Eni to study developing two Iranian fields.
Energy Ministry negotiates $15bn worth projects with private/foreign companies
The vice Minister of Energy said that under the Rouhani government, many foreign countries have shown interest in Iran’s water and electricity projects and specifically named Germany, Austria, Japan, Korea, and China. According to ISNA, Alireza Daemi said negotiations have been held on $15 billion worth projects in this sector, but did not provide details.
NIORDC and Korean Daelim sign contract to upgrade Isfahan refinery
The managing director of National Iranian Oil Refining and Distribution Company (NIORDC) confirmed that a contract which is worth about 2 billion euros for development and optimization of the Isfahan Oil Refinery has been signed with Korean Daelim and explained that the project will be financed through a Korean line of credit. According to the Iranian Energy News website, Abbas Kazemi said that this line of credit may also be used to finance a number of other refinery projects as well. Kazemi declared that an agreement has recently been signed with a consortium comparing Korean and Japanese companies to conduct studies for upgrading the
1 Organization for Investment, Economic & Technical Assistance of Iran
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Bandar-Abbas refinery. Daelim, Mitsui and CHYODA are reportedly the three companies that are supposed to be involved in the Bandar-Abbas refinery development project.
Italian Eni signs agreement with NIOC to study developing two Iranian fields
NIOC and Eni signed an agreement on Tuesday which allows the Italian oil major to carry out studies for developing the Kish gas field as well as the 3rd phase of the Darkhovein oil field, Shana news agency reported. The agreements were signed between Gholamreza Manouchehri, the managing director of NIOC-affiliate Petroleum Engineering and Development Company (PEDEC), and Antonio Vella, the Eni’s chief upstream officer. According to this agreement, Eni is given 6 month to submit the results of its studies on the aforementioned fields. So far, similar agreements have been signed with other European and Asian companies including Shell for studying the fields and submitting the results to the NIOC.
France’s Total to go ahead with major Iran gas project: Reuters
Total’s Chief Executive Patrick Pouyanne told Reuters today that the company will go ahead with development of South Pars gas Phase 11 field this summer. According to Reuters, having been aware of the possibility of sanctions’ snap-back, the French groups accepts the risk of making an initial investment of $1 billion investment in the hope that it will make a huge market.
"It is worth taking the risk at $1 billion because it opens a huge market. We are perfectly conscious of some risks. We have taken into account (sanctions) snap-backs, we have to take into account regulation changes," Pouyanne said. Total holds a 50.1 interest in the South Pars project along with Chinese CNPC, with 30%, and Iran's Petropars with a 19.9%, he said.
NIOC Managing Director Ali Kardor told local reporters this morning that the contract for developing South Pars phase 11 is ready and will likely be signed with Total in two weeks.
Former OIETAI chief says Iran’s foreign investment law needs overhaul
The former OIETAI2 president declared that he leads a study group incepted a year ago to change the law investment in Iran, saying the current law is a serious impediment in attracting capital, Mehr news agency reported on Tuesday. Behrouz Alishiri who is currently a member of the TCCIMA’s post-sanctions committee. He said that the existing foreign investment law has problem in four areas namely the “foreign capital attraction system”, the organization responsible for attracting foreign investment, the ownership system, and the capital transfer system. Alishiri didn’t explain at which stage this studying work is and when and how the changes will be implemented but said establishing an independent, professional, and forward- looking organization tasked with policy-making is necessary.
After 27 years, Iran’s annual inflation rate is curbed to a single digit
In late March, the CBI announced that the inflation rate for the last Iranian calendar year (1395) was 9%, which is unprecedented in 27 years. The last time the Iranian economy experienced a single digit inflation rate was in 1990, which can be considered as an achievement for the government of President Rouhani. As the following graph shows, when Rouhani assumed office in August 2013, the Iranian economy was facing a skyrocketing inflation due to the populist and expansionary fiscal policies implemented by the former government. In order to confront the spiraling inflation rate, the government of Rouhani implemented contractionary monetary policies. Graph 1 shows the trend of monthly inflation rate in Iran in the past four years.
2 Organization for Investment, Economic & Technical Assistance of Iran (OIETAI) is affiliated with the ministry of Economic Affairs and Finance and its president is appointed by the minister
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Expert believe that the downward movement of the inflation rate in Iran is likely to be reversed during the second term of President Rouhani in office as in order to stimulate the economy to create millions of required jobs, he needs to take monetary expansionary policies to stimulate the demand side (such as injecting money supply to the development projects and reducing legal reserves of commercial banks to encourage the private sector to borrow for projects) that without any doubt will increase inflation.
An example of the government’s policy of implementing expansionary monetary policies to stir the economy is the remarks of the deputy minister of Industry, Mine & Trade who announced on Monday that the CBI has initiated steps to extend 30 trillion tomans ($9.2 billion at the official exchange rate) in loan facilities to the SMEs. Speaking at a press conference, Mohsen Salehi- Nia said the facilities will be spent on renovating industrial and mineral enterprises. Also, a report recently released by the CBI shows that the amount of loan facilities extended by the Iranian banks in the last Persian year increased by 31% compared with the preceding year.
5 10 15 20 25 30 35 40 45
Graph 1 - Monthly inflation rate since 2013 Sep 2013
40.4%
Sep 2014 21.1%
Sep 2015 14.8%
Sep 2016 8.7%
5 10 15 20 25 30 35 40 45 50
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Graph 2 -
Yearly inflation rate in Iran
1995 49.4%
2013 34.7
1990 9%
2015 9%
