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Iran Economy Update
Issue 79/2017
THURSDAY AUGUST 24TH
IRAN-KOREA
CBI and Korean Exim Bank signed €8 billion financing contract
CBI Government Valiollah confirmed that the “biggest post-sanctions contract” worth
€8 billion was signed today with Korean Exim Bank, the Islamic Republic of Iranian News Network (IRINN) reported. The initial agreements were reached during the trip of former minister of Economic Affairs &
Finance Ali Tayyebnia to Korea a few months ago. The news has been covered by Iranian main news agencies including Mehr, IRNA, ISNA, and ILNA. Tasnim and Fars news have not covered the news by the time of this report, 12:11 pm Thursday.
Source of the photo: IRNA
IRNA wrote the contract was signed by OIETAI President Mohammad Khazaie and Korean Exim Bank executive director, and that during the signing ceremony, the Iranian official praised Korean economy as the world’s 11th biggest economy in the world that has good technological capabilities. Mr. Khazaie said the signing of this financing contract is “an important step”
in developing the two countries’ relations.
The Iranian private and state (government) sectors can use this loan, said Khazaie,
adding that 12 Iranian banks have been identified as the agent banks in this context.
According to IRNA, the executive director of Korean Exim Bank said this contract is an important step in developing bilateral relations “based on securing mutual interests.” The value of the contract was initially set at €5 billion but later was raised to €8 billion, wrote IRNA.
According to the Iranian ministry of Economic Affairs & Finance, several projects especially in the health, transport and energy sector areas are ready to be introduced to the Korean side, IRNA wrote.
The news agency has cited the $1.7 billion worth contract with Chinese EXIM Bank for electrifying the Tehran-Mashhad railway as well as the €2.2 billion contract with Russia as the two more financing contracts Iran has signed post-sanctions
One day before the signing ceremony, CBI Governor Seif had explained on his telegram channel that “apart from the direct impacts such finance contracts will have on implementing the country’s development and production projects and creating jobs, they indicate the interest of foreign countries in establishing long-term relations with the Iran and proves the trust the two countries’
financial systems have in each other. Today we witness that the efforts we made in developing international relations and amending the economy have bore fruit and this trend will continue in the future.”
Iranian local daily praises Korea’s economic progress
The August 21st issue of the economic daily Donyay-e Eghtesad has devoted its front page to an editorial on the reasons for economic development of Korea and addressing a question on why its economy overtook Iran in the past decades. The
2 article titled “the secret of Korea overtaking Iran” analyses the factors that caused less economic growth in Iran in comparison with countries like Korea that is among the world’s top 20 economically powerful countries. “The most important factor in Korea’s economic development program has been identifying the prioritized industries and allocating scarce resources to such industries,” wrote Donyay-e Eghtesad.
The author argues that Iran and Korea started modernization and development programs simultaneously in the 1960s but Korea experienced a more accelerated economic development while Iran, in spite of being endowed with abundant [natural]
resources and a richer record in development planning is still in a poor state.
On gauging the root causes of the poor state of economic development in Iran.
Donyay-e Eghtesad believes that focusing on too general development plans without attention to priorities, having misperception about the true concept of planning, insufficient political will, inattention to the existing conditions, inattention to the exogenous factors, limited access to statistics and such like are among the factors that have resulted in less-than- expected economic development in Iran compared with countries like Korea.
In a quite separate development, the Sunday issue of the economic daily Jahan-e Sanat published a report on the government-private sector dialogue session which is regularly held at the Tehran
Chamber of Commerce, Industry, Mine &
Agriculture (TCCIMA) to discuss problems plaguing the private sector in Iran and impediments for development. The existing impediments in foreign investment law, the problem of ownership for foreign investors, vague arbitration status in investment disputes, and pervasive corruption in Iranian economy were among the top issues that the participant to this session raised and discussed.
Iran-Europe
Iran says willing to develop railway cooperation with Europe
A senior Iranian railway official said that one of the strategic goals the country pursues in this area is activating transit corridors and cooperation with the European railways, Mehr news reported on Thursday. Nourollah Beiranvand, the Islamic Republic of Iran Railways’ deputy for planning & transport affairs said this organization has made
“extensive interactions” with the European countries and international institutions in technology transfer, financing, investment and procurement of equipment.
“The Islamic Republic of Iran Railways has expensive cooperation with European countries and with Italy and Spain it has held talks on installing high-speed lines, with Germany, UK, France and Italy on procurement of high speed fleet, with China and Korea on procurement of passenger and suburban fleet, with Chinese and Russian companies on establishing electric lines, and with Europe, India, Ukrain and Russia on developing electric lines,” added Mr. Beiranvand.
In a related development, the twitter account of Mr. Yar Batmanghelich, the founder of the Iran-Europe Forum has provided useful info of the contracts Iran has signed post-sanctions with foreign countries since the nuclear deal Implementation Day on Jan 2016. A summary of his info is presented in the following table:
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Date parties value note
2016
2 Dec
Telepizza – Momenin $100mn (food)
200 stores in 10 years 3
Oct
Siemens - MAPNA not known buying 50 locomotives 6
Oct
French Groupe PSA
–SAIPA (50/50) €300mn JV (car)
Citroen models 11
Dec
Boeing-Iran Air $16.6bn deal
buy 80
planes 22
Dec
Airbus-Iran Air $18bn deal
buy 100 planes 28
Jan
French Groupe - IKCO
$400mn JV (car)
investment Q2
2016
German Henkel- Iranian Pakvash
€62mn (FMCG sector)
purchase shares in local JV 21
Aug
Hemkel- Behdad Chemical
€365mn in (FMCG)
detergent business
2017
25 Jan
Austrian OMV-Iranian Dana Energy
not known (oil sector)
explore Zagros fields 4
Apr
Boeign – Aseman $3bn MOU
purchasing 30 planes 13
Apr
ATR- Iran Air $536 million (aviation)
buy 20
turboprop 8
May
MTN-Iranian Net $295mn MOU
$400mn financing 4
July
Gruppo FS - IRIR $1.2bn (transport)
€5bn export credits 4
July
Volkswagen–MAMUT Khodro
not known (car)
Passat &
Tiguan 23
July
Total & CNPC &
Petropars
$4.8bn JV (50/30/20)
SP phase 11 development 27
July
Alstom+IDRO+IRICO (60/20/20)
not known (transport)
produce rolling stock 25
July
China EXIM Bank - BIM
$1.5bn contract
finance high- speed rail 1
Aug
Transmashholding + IDRO (80/20)
$2.98bn contract
produce rolling stock 5
Aug
SK E&C - NIOEC $1.8bn contract
Tabriz refinery 7
Aug
Renault+IDRO+Parto Negin (60/20/20)
$778mn contract
largest ever auto deal Last Sunday and during the first session of his cabinet after receiving vote of confidence from the parliament President Rouhani once again emphasized on the importance of foreign investment in creating job for the youth. He said that the ministry of Economic Affairs & Finance and the CBI have a “very heavy” duty in attracting foreign and domestic investment.
“The government has no duty more important than creating jobs and [boosting]
production and realizing an economic overhaul, that will be achieved through more coordination among different economic apparatuses and also through attracting foreign investment and technology. Hence, it is expected that double efforts are made for taking big strides in different economic sectors including in oil, gas and petrochemical sectors,”
Iran-Netherland trade volume registered 50 pct rise this year: Ambassador says Iran’s Ambassador to the Hague says new opportunities have been created for investment of the Dutch companies in Iran and added that the value of the two countries’ trade volume this year registered a 50 percent increase compared with the previous year, Mehr news agency wrote on Thursday. Alireza Jahangiri underscored that the Islamic Republic is willing to develop extensive economic cooperation with European countries, including the Netherland. “with regards to the very extensive capacities and its strategic positions in Western Asia, the Islamic Republic has developed its relations with various countries including with Europe post-sanctions and significant number of contracts have been signed in this regard,”
said the Ambassador.
Cabinet Watch
What is the name of Rouhani’s men in new cabinet? After the parliament approved nearly all of Rouhani’s cabinet picks, below are the names of economic and energy-related cabinet ministers and government officials:
Eshagh Jahangiri (reformist) retained position as 1st Vice President.
Abbas Akhundi (reformist) retained position as minister of Road & Urban Development.
Bijan Zangeneh (moderate/centrist) retained position as minister f Petroleum
Ali Rabiei (reformist) retained position as minister of Labor, Cooperative &
Social Welfare
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Massoud Karbasian (reformist) was approved as minister of Economic Affairs & Finance, replacing Ali Tayyebnia. His was formerly the head of the Iranian Customs Administration
Mohammad Shariatmadari (centrist) was approved as minister of Industry, Mine & Trade, replacing Mohammadreza Nematzadeh. He was vice president for executive affairs.
Mahmoud Hojjati retained position as minister of Agricultural Jihad.
Mohammad-Bagher Nobakht (centrist) retained position as the head of the Management & Planning Organization
Eessa Kalantari (reformist) was appointed as the vice president and head of the Department of Environment.
Kalantari replaces Ms. Massoume Ebtekar who will serve as the vice president for women & family affairs in the new cabinet.
Mohammad Nahavandian (centrist) was elected as vice president for economic affairs. Nahavandian used to serve as Rouhani’s chief of staff from 2013-2017.
Also, since the president’s nominee for the position of Energy ministry failed to receive vote of confidence, President Rouhani appointed Sattar Mahmoudi as the caretaker of the ministry. Mahmoudi has been vice minister of Energy under the Rouhani’s first tenure. According to the Iranian law, caretakers can serve up to three months before the Majles decides about the president’s new nominee.
CBI confirmed news that Rouhani’s 1st govt. absorbed $11.8bn in investment In a report released last Thursday, the CBI announced that during President Rouhani’s first government, the country attracted some
$11.8 billion in foreign investment that will be used for 36 defined projects.
In a session held last week in the parliament to defend his first term ministerial record to receive vote of confidence for the second term, Minister of Foreign Affairs Javad Zarif
had said that the Rouhani government has managed to attract some $11.8 billion in investment, which is not comparable with the $3.4 billion and $3.9 billion attracted by the former president Ahmadinejad’s two governments (2005-2009) and (2009-2013), respectively. Such figures spurred Zarif’s hardline opponents to question the veracity of such figures saying the minister has overstated the true figures. The daily Donyay-e Eghtesad, with reformist political leaning, has defended Zarif’s figures, saying the attracted foreign investment under the Rouhani’s fist tenure is the same amount announced by Zarif in the Majles, if not being much higher than that.
Iran-Russia
Iran-Russia to commence oil-for-goods deal soon
A Russian news agency wrote on August 18 that Moscow and Tehran may shortly agree upon conditions for sale of 100,000 oil barrels per day. According to Russian Tass news agency, the country’s Energy Minister Alexander Novak on Aug 18 said that the Islamic Republic can start deliveries of crude oil under the “oil-for-goods” program within the next month and added that the two sides are finalizing the last details.
Meanwhile, Iranian Deputy Petroleum Minister for International & Commercial Affairs Amir-Hossein Zamani-Nia confirmed this news last Sunday and expressed hope that crude delivery to Russia will commence by late September or late October. He said that a contract in this respect was finalized a few months ago and explained that Iran will be paid for the crude half in cash and half in Russian goods. According to Mehr, Zamani- Nia said that this is a “very important agreement” which results in developing Iran-Russia cooperation in all sectors.
On note, January 2014, Reuters had divulged that Tehran and Moscow have reached an agreement for some sort of oil- for-goods barter arrangement. Iranian Petroleum ministry officials initially denied the news but later admitted that.
