1
Iran Economy Update
Issue 46/2017 SUNDAY APRIL16TH
Flood death toll in western Iran reached 38 by Saturday evening
Shargh daily wrote that the rainfall that started pouring down from Friday morning countrywide resulted in flooding of rivers, breaking the dams, destroyed houses, and caused significant damages in four Iranian western provinces of West and East Azerbaijan, Zanjan and Kordestan, and that the death toll reached 38 of which bodies of 31 have so far been discovered. The rain shower lasted for 24 hours and according to Khalil Saee, the director general of the Crisis Headquarters in East Azerbaijan, the people who were killed in the flood were the ones who didn’t pay attention to the warnings of the authorities.
President Rouhani in Assalouyeh to inaugurate South Pars gas fields
President Rouhani is scheduled to visit the southern Assalouyeh city this morning to inaugurate a number of new South Pars gas fields, namely phases 17-18 and 19 and 20- 21. Petroleum Minister Bijan Zangeneh said last night that some $18 billion has been invested on the phases of which more than
$6 billion was spent by the incumbent government. Zangeneh has also said that the amount of gas produced under the current administration (that assumed office in summer 2013) has grown 2.4 times.
Mansour Moazzami, the IDRO president that leads a consortium of Iranian companies that carried out the development of the aforementioned South Pars projects said “Today, a very important development occurred in Iran’s petroleum industry with the greatest amount of investment ever made in the history of Iranian oil industry.”
South Pars gas field is shared between Iran and Qatar and NIOC Managing Director Ali Kardor said today that this Arab country has so far extracted some 1,771 billion cubic
meters of gas from the joint field, compared with the 1,060 billion cubic meters Iran has extracted. The twitter account of the reformist daily Shargh wrote this afternoon that with the launch of South Pars phases 17, 18, 19, 20 and 21, for the first time Iran’s production of natural gas from this shared field equals that of Qatar.
Along with the inauguration of the five gas fields, four petrochemical plants and a project for producing up to 35,000 bpd crude oil from the South Pars oil layer will be inaugurated by the president today. After the intensification of sanction, the contract for developing South Pars phases 17 and 18 was signed in 2006 with a consortium comprising local companies and the project was supposed to come on stream in 52 months but it took more than 120 months to complete. Petroleum Minister Bijan Zangeneh appeared on the state TV on Saturday night and said that the phases will totally produce 150 million cubic meters per day of natural gas, that will increase total gas production from South Pars field to 575 million cubic meters.
Iran FINEX 2017 inaugurated on Saturday in Tehran
CBI Governor Valiollah Seif, Minister of Economic Affairs & Finance Ali Tayyebnia, President of Securities & Exchange Organization (SEO) Shapour Mohammadi, Vice President for Science & Technology Sorena Sattari, Minister of Foreign Affair M- Javad Zarif, and Central Insurance CEO Abdonaser Hemmati were the main speakers of the inauguration ceremony of the FINEX 2017 Exhibition in Tehran on Saturday. The daily Donyay-e Eghtesad has cited the exhibition as the most important event in Iran’s financial market. As the first speaker, SEO President Shapour Mohammadi talked about an improvement
2 in the status of the country’s capital market.
“The market size in 2016 was 490 trillion tomans, indicating a 103 percent increase in four years,” he was quoted as saying by Donyay-e Eghtesad.
Addressing the event, Governor of the central bank Valiollah Seif said the biggest achievement of the CBI last year in Iran’s capital market was reducing interbank interest rate from 28% to 17% but expressed regret that this achievement later faded after the government issued Islamic Treasury bonds (Sukuk) with the effective interest rate of 20% to fund itself, and also due to the high interest rate of 20% that some investment funds with fix income offered to the people.
“Today, Iran’s banking system is suffering from two basic imbalances which are the asset/debt imbalance and the income/expenditure imbalance,” said Seif, adding that the CBI has put serious plans to treat them on its agenda. According to him, another related plan the CBI has put on agenda in parallel is reforming the business system structure. Seif said reducing interest rate is a necessary measure to protect the banking system and called for cooperation between the SEO and the Management &
Planning Organization (MPO) to help this objective realize. “At the current juncture that the structure of the banking system is severely damaged and is grappled with unconventional toxic and impaired assets and financial impasse, the Management &
Planning Organization and the Securities &
Exchange Organization (SEO) need to be careful about the timing of the issuance of govt. treasury bonds (Sukuk) as well as supervising the high interest rate offered by the investment funds,” he said.
Improving transparency in the financial statement disclosure of banks, ensuring financial stability of banks, and obliging banks to submit their performance reports on deposits were some other measures Seif underscored the CBI pursues.
As another speaker at the FINEX 2017 inauguration ceremony, Minister of Economic Affairs & Finance Ali Tayyebnia said that “in order to establish long-term economic reforms, the government has devised a set of long term plans that will be pursued along with the [existing] short term fiscal, monetary, trade and foreign currency policies.” He said that as stipulated in the Supreme Leader’s remarks in his quest to name this year as the year of Economy of Resistance; Production & Employment, we need to enhance non-oil products that should play a key role in the targeted 8- percent economic growth rate. “One of the necessary instruments to realize this objective is improving the efficiency of the financing system and using the capacities of the capital market,” said Tayyebnia. The minister said that all the indices in the capital market indicate a positive and a forward-looking development. He said that in the past five years, the total financing capacity of the primary and secondary markets has increased by 285%, the average market size has grown by 103%, and the transactions value has increased by 75%. Tayyebnia boasted that Iran’s Doing Business ranking has improved by 32 places, and also the coutnry’s position in Economic Freedom, Transparency &
Corruption Parentage, and Property Rights have improved by 18, 13, and 10 places, respectively. He also boasted that one of the most important measures taken by this government was launching the debt market to address the huge amounts of debts the government owed to the private contractors, to the CBI and to other commercial banks.
He said that to this end, this government issued some 13 trillion tomans in Islamic Sukuk in 2016.
“The path we’ve started will continue with implementing reforms and proper macroeconomic policies and with extensive participation of private sector and contribution of financing system tools, that will all end up with a developed and advanced Iran. In line with this objective, we welcome the Iranian and foreign investors
3 and press their hands warmly,” concluded the minster.
MOFA issued 5th report to Majles on JCPOA implementation and challenges ISNA news agency has published the fifth quarterly report of Iranian MOFA to the Majles on the implementation of the JCPOA. The report covers a period from 15 January to 15 April 2017 and comprises three parts namely (1) the latest developments in the nuclear activities, (2) the latest developments concerning the elimination of sanctions, and (3) obstacles and challenges. In the first sector, MOFA provides an update about the Arak heavy water rector modernization, the developments pursued by the Islamic Republic in the Fordow nuclear structures, Iran’s collaboration with the IAEA, and the coutnry’s enriched uranium reserves. In the second sector, MOFA briefs the parliament about the elimination of sanctions and measures taken in this regard. “The developments took place in the past three months in sanctions relief are categorized in the following three sectors,” reads the MOFA report, according to ISNA:
1) In the banking and finance sector, great achievements were realized that saved the country’s banking system from an impasse. From the date of the implementation of the JCPOA to 20 March 2017, some 704 banking correspondent relationships have been established with 249 foreign banks.
Also, from the Implementation Day to 20 March 17, some $25.7bn worth of the coutnry’s frozen assets have been released of which, $9.3bn were released in the past three months.
2) In the petroleum realm, all the barriers are removed and the country faces no limitation in production and exports of oil, gas and petrochemicals or any problem in receiving the earnings.
3) All the nuclear related sanctions in the transportation sector have been lifted and in the past two months, Iran Air received the 2nd and 3rd Airbus Aircrafts.
4) The names of three Iranian companies have been removed from the EU sanctions list, which included the Oil Pension Investment Company, the Neka Novin Co., and the West Sun Commercial Company.
5) The name of some of Iranian individuals were removed from the UK Government Iran Sanctions List
6) The US Treasury on Feb 2 updated the scope of medical devices that are not authorized for exportation to Iran.
7) In the past months, the JCPOA Purchase Channel has approved six requests required by the country’s mineral, pharmacy, steel and car industries. Prior to the lifting of sanctions, supplying such equipment to Iran was forbidden due to the sanctions.
8) In the past year, the name of 611 Iranian firms and officials, along with 303 aircrafts, oil tankers and ships registered in Iran have been removed from the list of sanctions.
9) The next session of the JCOPA Joint Committee will be held in Vienna on 25 April.
Challenges and barriers:
a) OFAC on 3 Feb included the name of 13 real or legal Iranian individuals in the list of sanctions. Also on March 20, 11 foreign firms were slapped with sanctions for alleged cooperation with Iran in provision of missile part and equipment.
b) The comments made by the new US president have caused some doubts about his seriousness in remaining faithful to the US commitments in implementing the JCPOA.
c) The primary US sanctions, sanctions and non-nuclear limitations, the restrictions imposed by the FATF, the Iranophobia environment, the Iranian and non-Iranian individuals and groups that benefit from sanctions are among some other challenges that put obstacles in implementing the JCPOA.
