All in Economy

Iran Budget Under Scrutiny As Oil Revenues Fall

◢ 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.

Bankless Task: Can Europe Stay Connected to Iran?

◢ 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.

Unintimidated, Iranian Lawmakers Pass Counter-Terror Financing Bill

◢ 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.

Iran's Currency Crisis Is Decades in the Making

◢ 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.

7 Charts That Challenge the Distorted View of Iran's Economy

◢ There is a growing sense that Iran has squandered its chance to join the ranks of the BRICs—Brazil, Russia, India, and China—which count as the great emerging markets of the world. As sanctions return, as the rial sheds value, and as protests become routine, Iran is increasingly portrayed as an economic basket case where state collapse is just around the corner. But comparing Iran’s macroeconomic performance with Brazil, another country that has contended with widespread protests and economic angst for over three years, paints a very different picture.

Iran's Currency Crisis is a Supply-Side Story

◢ On Monday, the Iranian rial sank to a historic low. But those Iranians who scrambled to convert their rials into dollars found it difficult to do so—as they have for months. This important detail of the current crisis has gone largely unexamined. While the determinants for demand for foreign exchange are well understood, the second determinant of market prices—foreign exchange supply—remains subject to mere passing mention. This is a mistake. Iran’s currency crisis is a supply-side story.

Rising Prices Push Homebuyers Out of Iran's Capital

◢ A 41 percent rise in Tehran City’s average home prices has left some residents, especially renters, with no option but to leave the capital for more affordable housing units in suburban areas close to Tehran. As per the latest national census, Karaj was the top destination for residents moving out of Tehran during the five years to December 2017. In just the last three months, more than 53,000 individuals have moved from Tehran to Karaj City. In the first quarter of the Iranian fiscal year, the Karaj housing market recorded 65 percent growth in home sales and an 18 percent increase in the average price of residential units.

US Officials Warn of ‘Deceptive Web’ of Iran Business, But Hamper Transparency Efforts

◢ In a recent speech, Under Secretary of the Treasury Sigal Mandelker warned that foreign companies that maintain a presence in Iran must conduct “extra due diligence to keep them from being caught in Iran’s deceptive web.” But background conversations with several compliance specialists reveal that US sanctions are a major barrier to key AML/CTF reforms in Iran. Industry-standard compliance software is not accessible for Iranian end users, leaving some experts to conclude that Iran is being “set up to fail.”

Closure of Tehran Bazaar Reflects Fierce Elite Competition, Not Popular Politics

◢ The bazaar of today is not the bazaar of forty years ago, and no longer plays the same role as a key actor in Iran’s popular political mobilizations. The recent bazaar closures reflect primarily the economic self-interest of bazaar elite, who sense an opportunity to put the brakes on reforms that threaten their unique capacities for lucrative arbitrage. Protests are being co-opted as a political tool at the expense of genuine civil society mobilization.

They Want War With Iran, They’re Settling For Economic War

◢ On Tuesday, French officials convened a briefing for French business on possible responses to Trump’s reimposition of secondary sanctions. French Minister of Economy Bruno Le Maire reportedly cited the French parable that “money is the nerve of war” to describe what is at stake. He may be more correct than he realizes, as the Trump administration gears-up for an economic war on Iran.

Rouhani Government Unifies Iran’s Exchange Rates in Decisive Move to Stabilize Currency

◢  In a decisive move intended to stop the further devaluation of the rial, the Rouhani government announced it would unify the official and free market dollar exchange rates, settling on an official rate of IRR 42,000. First Vice President Eshagh Jahangiri made the announcement last night, declaring that trading dollars above the new rate would be a serious crime. 

Iranian Protests And The Working Class

◢ There is growing consensus that the core constituency of the recent wave of protests in Iran is working class youth who feel "forgotten" in the country's economic plan. 

◢ The expected post-sanctions windfall has yet to materialize and the Rouhani administration will need to decide whether it will compromise on its austerity-type budgets in order to offer some near-term economic relief. 

Iran Starved of Investor Capital Needed to Fuel Extensive Privatizations

◢ Morteza Lotfi, the newly appointed head of SHASTA has recently announced a new effort for SHASTA to divest from a large portion of its portfolio, offering a second chance at the privatizations pursued a decade ago. 

◢ But political barriers and a dearth of capital, particularly from foreign investors, risks rendering SHASTA's plan dead on arrival as Iran seeks to liberalize without crucial liquidity.

Majority of Business Leaders Blame Trump for Slow Iran Investments

◢ A new survey by Bourse & Bazaar and IranPoll finds that business leaders believe Trump's rhetoric has slowed the pace of trade and investment by multinational companies in Iran.

◢ However, the results come at a time when the underlying commercial momentum seems strong. This suggests that Trump's words are having an impact not on those most directly working with Iran, but on the stakeholders on whom they rely. 

New Survey Examines Iranian Attitudes Towards Foreign Investment, Multinational Companies

◢ New survey conducted by IranPoll in partnership with Bourse & Bazaar looks at Iranian attitudes towards economic reform and foreign investment with new detail

◢ Iranians demonstrate high degree of openness to foreign investment and the economic reforms necessary to facilitate that investment. But they want multinational companies to do more to localize their offerings effectively. 

To Break With Austerity, Rouhani Must Deliver on Sovereign Debt Sale

◢ To win foreign investment, Iran's needs to boost development expenditures. But expansionary fiscal policy will require a new source of revenue, as oil sales remain stagnant and tax rises remain politically risky. 

◢ A sovereign debt sale, long discussed by Iranian officials, is the fundamental way Iran can find the revenues to self-fund growth. The Rouhani administration must focus on making its bond offering a reality.