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All in Economy
◢ China has taken its second Iranian cargo of crude oil after US waivers expired in early May, further defying US sanctions on Iran’s oil exports. The HORSE, a VLCC owned by the National Iranian Tanker Company (NITC) discharged its oil at Tianjin port in northern China, data provided by market intelligence firm Kpler shows.
◢ According to analysis provided by TankerTrackers.com, a tanker owned by the National Iranian Tanker Company (NITC) has delivered oil to the Jinxi Refining and Chemical Complex in China, marking the first confirmed delivery of Iranian crude purchased after the Trump administration’s revocation of waivers permitting the sale of Iranian oil on May 2.
◢ To help alleviate the strain of rising house prices, the Rouhani administration announced earlier this month that it would begin implementation of its long-awaited social housing construction campaign intended to increase the availability of affordable homes for low-income families. The National Action Plan for Production and Supply of Housing aims to construct 400,000 small and medium-size apartments.
◢ During a meeting with the Islamic Republic's political elite, Supreme Leader Ayatollah Ali Khamenei reiterated calls for a “resistance economy,” but also placed new emphasis on the “increasing the ease of doing business.” The specificity of some of Khamenei’s advice and observations about Iran’s economy suggests a greater appreciation for the practical importance of economic reforms that go beyond well-worn political slogans.
◢ On the same day that Iranian foreign minister Javad Zarif traveled to Beijing for talks on "regional and international issues,” the Chinese oil tanker PACIFIC BRAVO began to head east, having loaded approximately 2 million barrels of Iranian oil from the Soroosh and Kharg terminals in the Persian Gulf over the past few days, according to analysis provided by TankerTrackers.com.
◢ The appointment of a new CEO at Iran Air exemplifies Iran’s renewed reliance on what its Supreme Leader, Ayatollah Ali Khamenei, has called a “resistance economy.” In order to overcome the restrictions imposed by sanctions, Iran will turn increasingly to a cadre of “resistance managers,” elevating individuals and empowering networks with unique capacities to keep Iran’s trade flowing under duress.
◢ Working class Iranians could look forward to a hearty meal of meat stew or kabob at least once a week. But with meat prices soaring to all-time highs, Iranians are having to cut back on their consumption in yet another example of falling living standards as Iran’s economy falters under the pressure of sanctions and mismanagement.
◢ The Trump administration has announced a new wave of sanctions on Iran’s steel, aluminum and copper industries. But while the administration has claimed the move is intended to deny Iran’s government foreign exchange revenue, the likelier intention behind targeting the metals industry related to the sector’s role as perhaps the single most important employer in Iran.
◢ The standoff between the Trump administration and Iran is escalating, and Europe is caught in the middle. Brussels and national governments in the U.K., France and Germany, meanwhile, have been criticized by Iran for their response to U.S. sanctions. Europeans “speak eloquently”, Iran’s foreign minister Mohammad Javad Zarif said in February. “They also need to walk the walk.” But it would be wrong to dismiss Europe’s efforts as hopeless.
◢ Mohammed Barkindo, the Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), will arrive in Tehran tomorrow to visit an annual oil exhibition. Iran is one of the five founding members of OPEC, which is set to mark its 60 year anniversary. Despite this long history, the extraordinary challenges facing Iran’s oil industry have spurred industry leaders to debate three scenarios regarding Iran’s membership in OPEC.
◢ Iran’s automakers have pre-sold more than 1 million vehicles, most of which are earmarked for delivery to customers in the Iranian fiscal year that started in March. But with vehicle production declining at a steep rate, fulfilling these orders will be no easy task.
◢ Reform-minded Iranians, especially those inside the ailing banking system, are worried that the US government’s step to designate Iran’s Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization has doomed a years-long effort to get the Islamic Republic off a consequential global blacklist.
◢ Iran’s economy was already creaking as two weeks of flooding devastated communities across the country, killing 76 people and damaging critical infrastructure and industries. Hundreds of thousands of Iranians have been left to pick up the pieces at a time when economic pressures may mean that their government and fellow countrymen will struggle to provide adequate relief.
◢ The deadline for the US administration to decide whether to extend sanctions waivers granted to buyers of Iranian oil is now less than a month away, and President Donald Trump faces a tricky decision. He undoubtedly wants to increase pressure on the Persian Gulf nation, but in doing so he risks stoking oil prices and with them those all-important gas prices in swing states back home.
◢ Expectations were high when Iranian president Hassan Rouhani visited neighboring Iraq last month. During the trip, his first as president, Rouhani signed multiple trade deals with Iraq, where the return of peace and stability has renewed the government’s focus on economic development. Iran’s reinvigorated diplomacy towards Iraq reflects a new diplomatic and economic strategy towards its onetime foe.
◢ Last week, Iran’s economic minister was in Beijing for talks on bilateral trade and investment. An official readout of the discussions from China’s commerce ministry describes China and Iran as “comprehensive strategic partners.” Unfortunately for Iran, the data tells a different story from the official rhetoric.
◢ Despite mounting evidence that the Iranian government’s policy of allocating subsidized foreign currency for the importation of essential goods has failed, the Rouhani administration has signaled that it plans to maintain the policy for at least another year. But lawmakers and Rouhani’s own cabinet ministers may force the administration to change course.
◢ Aiming to achieve self-sufficiency in the production of gasoline, Iran recently launched the third phase of the Persian Gulf Star Refinery, after a massive investment of USD 4 billion. But given rising consumption, the future of genuine gasoline self-sufficiency in Iran might be less bright than the new developments at the Persian Gulf Star suggest.
◢ A new draft framework put forward by the Central Bank of Iran proposes a ban on the use of global cryptocurrencies for payments within the country, disappointing members of Iran’s burgeoning “crypto” community. The central bank has given the community one month to offer feedback on the proposed rules and now members are hard at work trying to reach a consensus to solve a thorny problem of monetary policy.
◢ President Rouhani’s budget proposal for the upcoming Iranian year will see the government run a deficit amounting to about 10 percent of GDP or 60 percent of the state’s general budget, excluding oil revenues and withdrawals from the National Development Fund. Rather than increase tax collection to ease budget gaps, the Rouhani administration plans to tap Iran’s nascent debt markets to cover its public spending requirements.
