asdasdasdasdasdasdasdasdasdasd
All in Economy
◢ Despite strong relations, President Trump’s withdrawal from the JCPOA and his reimposition of economic sanctions has introduced significant challenges for Italian enterprises active in Iran. As with other European companies, Italian firms are unwilling to jeopardize their presence in the US market for the sake of opportunities in Iran. Yet, Italy and Europe have every interest to see that Iran continues to be an important trading partner and a supplier of energy.
◢ An examination of the nature of Europe-Iran trade and the impact of this trade on Iran’s currency markets, suggests that the SPV could have a significant and stabilizing impact on Iran’s economy by helping to fight runaway inflation, the foremost economic challenge facing Iran’s leadership—even if the mechanism is initially limited to humanitarian trade.
◢ Bank of Kunlun, the state-owned bank at the heart of China’s trade with Iran, has made a dramatic change in its policies, informing clients that it will no longer process payments that contravene US secondary sanctions on Iran. Kunlun’s change in policy cuts a longstanding financial lifeline for Iran’s automotive, shipping, petrochemical, and steel industries.
◢ Iran’s oil exports are likely to remain limited in 2019, with significant negative impact on Iran’s economy. Last month, the Trump administration reimposed sanctions on Iran’s energy sector as part of its ‘maximum pressure’ campaign against. But it nevertheless sought to prevent an unhelpful spike in oil prices ahead of the midterm elections. As a result the United States issued eight waivers to importers of Iranian oil:.
◢ Next week, President Hassan Rouhani will submit a budget proposal for the forthcoming Persian year (covering March 2019-2020). Currently, the Rouhani administration has few options as it seeks to avoid a budget deficit. Yet the political tradeoffs required when devising a budget under sanctions may prove more difficult to manage than the economic challenges.
A forthcoming documentary by journalist Yasha Levine and filmmaker Roman Wernham explores the fiercely political and highly lucrative world of pistachio farming in California, and its connections to US policy towards Iran.
◢ More than a dozen cargo ships carrying agricultural commodities are spending weeks anchored off the coast of Iran as importers are delayed in making payments. With supplies of soybeans and maize restricted and demurrage costs incurred when cargoes do finally make it to shore, the delays are having a significant impact on Iran’s economy.
◢ Data from Eurostat and the Swiss Federal Customs Administration show that European exports of pharmaceutical products to Iran have fallen considerably on a year-on-year basis. While some of Iran’s smaller trade partners have seen export values rise, Iran’s top sources of European pharmaceutical products are seeing exports contract.
◢ The combination of reimposed sanctions, a slowing economy, and a devalued currency have put Iran’s automotive sector under severe pressure With nearly 1 million jobs linked to the automotive industry, the price of a new car could be even more important than the price of oil for the Iranian economy. In an interview with Bourse & Bazaar, Saeed Madani, the former CEO of SAIPA, warned that price controls are squeezing state-owned automakers.
◢ China has halted its financial transactions with Iran as part of an unexpected gamble on the future of its trading relationship with the Islamic Republic. According to Majid Reza Hariri, deputy president of the Iran-China Chamber of Commerce, China is hoping to sustain its trade with Iran without putting its financial system in the crosshairs of US authorities by joining the special purpose vehicle being devised by Europe for this purpose.
◢ In an exclusive interview with Bourse & Bazaar, CEO of Iran’s Parsian Bank, which was sanctioned last week by the US Treasury, has described the designation of the bank as a Specially Designated Global Terrorist (SDGT) a “mistake.” The move against one of Iran’s leading private sector banks by has many in Iran’s banking sector worried about the ongoing viability of humanitarian trade.
◢ With just two weeks until Trump reimposes secondary sanctions on Iran, administration officials are under increasing pressure to prove that the returning sanctions will not adversely impact humanitarian trade. Looking to US Census Bureau export data, a clear pattern emerges—the export of humanitarian goods like food and medicine remains significantly lower than average monthly values registered during the Obama years.
◢ A new report from TankerTrackers.com indicates that Iran exported an average 2.2 million bpd of crude oil in the first two weeks of October, a 10 percent rise from the September average. October’s higher export volumes could reflect long-standing customers buying more oil ahead of planned reductions in November, when sanctions are expected to prevent many refiners from taking Iranian crude.
◢ On Tuesday, the US Treasury Department’s Office of Foreign Assets Control (OFAC) applied new sanctions on “at least 20 corporations and financial institutions” associated with Bonyad Taavon Basij. While the designation of bonyads has been a common feature of US sanctions policy for over a decade, yesterday’s action reflects a significant break with sanctions policy under the Obama administration. Included among the targeted entities is Parsian Bank, one of Iran’s leading private sector banks and a vital conduit for trade with Europe, especially humanitarian trade.
◢ With US sanctions on Iran’s banking sector due to come into effect soon, European countries are now considering measures that would facilitate trade transactions with Iran through a new legal and institutional structure. European governments have been reviewing this legal entity, known as a Special Purpose Vehicle (SPV), for months. The timing of this public announcement suggests that they have a degree of confidence that the SPV can become operational, and that Europe can use the model to showcase its ability to deliver on its commitments.
◢ Iran is resorting to “Houdini tricks” to sustain oil exports as US sanctions loom and new data suggests the magic might be working. While S&P Global Platts has reported Iran’s September exports at about 1.7 million bpd, marking an 11 percent decline from August, data from TankerTrackers.com, puts the export volume at just over 2 million bpd. The divergence in the datasets represents not merely 300,000 bpd, but also the difference between two narratives about the state of Iran’s exports in the face of returning US sanctions.
◢ Over the last six months, the public debate in Iran around FATF-related reforms has reached a surreal crescendo. Seldom do countries experience such intensive political debates over measures as technical and obtuse as financial regulations. But 143 lawmakers voted bravely to pass the final of four bills required by the FATF action plan, in a landmark vote that may increases chances that Iran maintains ties with international financial institutions in the face of returning sanctions.
◢ For over a year, European governments have been struggling to determine how they can create a financing facility for projects in Iran. But what if it is a mistake to focus on “external” finance? One underreported effect of Iran’s currency crisis has been the rapid expansion of liquidity in the market. In this environment, a local currency bond offered by a European-owned, Iranian-registered development bank would be highly appealing.
◢ In the coming weeks, the US administration will intensify its economic pressure on Iran through sanctions designed to curtail the country’s oil exports. Given that these exports account for a significant percentage of state revenue, the measures will hit Iran hard. Yet the sanctions will also have an impact on energy markets far beyond Iran, and may lead to a rise in global oil prices.
◢ The experience of countries such as China show that currency devaluation can be managed and even turned beneficial for the economy by enabling the growth of exports. But in Iran, the devaluation of the rial has never been proactively managed, and subsequent administrations have only sought to respond to repeated currency crises, about once each decade. As Iran faces another such episode, it remains to be seen whether a real monetary policy might finally emerge.
