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Maximum Pressure. Iran Signs Deep Debt w/ China. Many Fine Print Details.

Taking a look at stats from 2018:

-Iran’s GDP growth in 2017/18 dropped to 3.8 percent as the effect of a large surge in oil revenues in the previous year dissipated.

-In the past two years, there has not been a strong bounce back in key sectors such as construction and trade, restaurant and hotel services following the stagnation in growth during the sanctions period and the overhang from the problems of the banking sector.

-The unemployment rate remains high, at 12.1 percent as of Apr-Jun 2018,

-Youth (15-24 years) unemployment at 28.3 percent in June 2018 remains high compared to earlier periods and regional average.

-Real export growth of goods and services was 1.8 percent in 2017/18, down from 41.3 percent, while real import growth was 13.4 percent in 2017/18.

-By August 2018, the rial had devalued by 172 percent over the past 12 months, rising above 100,000 rials per dollar. This has contributed to the measured inflation rate returning to 24 percent in August 2018, a rate last seen since 2013.

-In the medium term, the economy is set to experience a downward trajectory as oil exports are expected to fall to half of their 2017/18 levels following the phased reintroduction of US sanctions culminating in November 2018. The economy is expected to contract by 1.4 percent on average between 2017/18-2020/21, experiencing a fall in exports and consumption on the demand side and a contraction of the industry sector on the supply side.

-Higher import prices from the devaluation are expected to push inflation back above 30 percent in the coming years as inflationary expectations spiral and consumer sentiment falls leading to once again a period of stagflation for Iran.

https://www  .worldbank  .org/en/country/iran/overview

Here’s why Iran would want to sabotage Saudi oil exports

-At the start of 2018, Iran’s crude oil production reached 3.8 million barrels per day (bpd), according to data gathered by the Organization of the Petroleum Exporting Countries (Opec). The country was exporting about 2.3 million bpd.

Most of the oil was bought by eight countries or territories that were granted six-month waivers by the US when sanctions on the Iranian energy sector took effect – China, India, Japan, South Korea, Taiwan, Turkey, Greece and Italy.

So long as those countries cut their purchases of Iranian oil over that period their banks were permitted to continue to conduct transactions for any purpose with the Central Bank of Iran or with any other Iranian banks without risking US penalties.

By March 2019, Iran’s oil exports had fallen to 1.1 million bpd on average, according to the consulting firm SVB Energy International. Taiwan, Greece and Italy had halted imports altogether, while the two biggest buyers – China and India – had reduced them by 39% and 47% respectively. A US official estimated that Iran’s government had lost more than $10bn ($7.7bn) in revenue as a result.

-President Rouhani kept the Iranian currency stable for almost four years. But it has lost almost 60% of its value against the US dollar on the unofficial market since the US sanctions were reinstated, according to foreign exchange websites.

The fixed official rate of 42,000 rials to the dollar is used for a limited range of transactions, so most Iranians rely on currency traders. Bonbast.com reported that traders were offering 143,000 rials to the dollar on 30 April.

-The rial’s slide has been attributed to Iran’s economic problems and a high demand for foreign currency among ordinary Iranians who have seen the value of their savings eroded and worried that the situation will get worse.

https://  www  .bbc  .com/news/world-middle-east-48119109

Iran just signed a bad deal to rescue their disintegrating economy.

-Iran’s foreign minister Mohammad Zarif paid a visit to his Chinese counterpart Wang Li at the end of August to present a road map for the China-Iran comprehensive strategic partnership, signed in 2016.

-However, many of the key specifics of this new understanding will not be released to the public, despite representing a potentially material shift to the global balance of the oil and gas sector,

-China will invest $280bn developing Iran’s oil, gas and petrochemicals sectors. This amount may be front-loaded into the first five-year period of the deal but the understanding is that further amounts will be available in every subsequent five-year period, subject to both parties’ agreement.

-Chinese companies will be given the first refusal to bid on any new, stalled or uncompleted oil and gasfield developments. Chinese firms will also have first refusal on opportunities to become involved with any and all petchems projects in Iran, including the provision of technology, systems, process ingredients and personnel required to complete such projects.

“This will include up to 5,000 Chinese security personnel on the ground in Iran to protect Chinese projects, and there will be additional personnel and material available to protect the eventual transit of oil, gas and petchems supply from Iran to China, where necessary, including through the Persian Gulf,” says the Iranian source.

Giving it all away

-“China will also be able to buy any and all oil, gas and petchems products at a minimum guaranteed discount of 12pc to the six-month rolling mean price of comparable benchmark products, plus another 6pc to 8pc of that metric for risk-adjusted compensation.”

Iran negotiated with bent legs

-Under the terms of the new agreement, Petroleum Economist understands, China will be granted the right to delay payment for Iranian production up to two years. China will also be able to pay in soft currencies that it has accrued from doing business in Africa and the Former Soviet Union (FSU) states, in addition to using renminbi should the need arise—meaning that no US dollars will be involved in these commodity transaction payments from China to Iran.

-“Given the exchange rates involved in converting these soft currencies into hard currencies that Iran can obtain from its friendly Western banks—including Europäisch-Iranische Handelsbank [in Germany], Oberbank [in Austria] and Halkbank [in Turkey]—China is looking at another 8-12pc discount [relative to the dollar price of the average benchmarks], which means a total discount of up to 32pc for China on all oil, gas and petchems purchases,” the source says.

-The pipeline plan will require the co-operation of Russia, as it regards the FSU states as its backyard. And, because, until recently, Russia was weighing a similarly all-encompassing standalone deal with Iran. So, according to the source, the agreement includes a clause allowing at least one Russian company to have the option of being involved, also on discounted terms, alongside a Chinese operator.

https://www  .petroleum-economist  .com/articles/politics-economics/middle-east/2019/china-and-iran-flesh-out-strategic-partnership

The deal was obviously inadequate to keep Iran’s economy afloat, so Iran also goes into debt with Russia.

-Russia & Iran to switch to SWIFT-free banking system

-Russia and Iran will transfer payments using an alternative system to the internationally recognized SWIFT money transfer network, the governor of the Iranian central bank, Abdolnaser Hemmati, announced.

-Instead of SWIFT, a system that facilitates cross-border payments between 11,000 financial institutions in more than 200 countries worldwide, the two countries will use their own domestically developed financial messaging systems – Iran’s SEPAM and Russia’s SPFS.

The article doesn’t say that Iran will be paying Russia with money or oil, but judging from the previous deal with China, Iran will undoubtedly sacrifice profits to keep selling oil through the Russian markets.

https://  www  .rt  .com/business/469007-russia-iran-swift-alternative/

 

 

 

 

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This entry was posted on 09/17/2019 by in Asia, Middle East, Russia and tagged , , , , .

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