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The deterioration of Iranís currency
Iranís economy losee $42 billion annually
The report has shown that despite a growing trade exchange between Iran and its neighbours since the sanctions on Iranís oil exports were implemented, Iranís economy is worsening each day.

Iranís quest for hard currency has helped to raise its trade exchange with Turkey to $16.5 billion by the end of 2011 and to more than $7 billion with Iraq.

According to the report Iran is trying, through its trade policy, to conciliate its neighbours and influence their foreign policies. Iran has increased its gas exports to Turkey to about 30 million cubic litre per day especially after the Azerbaijani gas pipe stoppage following a terrorist act.

Tehran is also trying to seduce Europe by selling Iranís gas for cheaper prices, compared to the period prior to implementing the trade sanctions, to try to make use of the European crisis and the need for cheaper energy especially for the winter season.

Iranian goods in Israel

The report mentioned some of the ways Iran is adopting to bypass the trade sanctions including using middlemen to export some of its goods. Tehran, which considers Israel as an enemy, is selling tons of raw unpolished marble and Caviar to Israeli businessmen, through Turkish agents, for millions of dollars which raises the question whether Israel is financing the boycotted Iranian economy.

New oil policy

The report added that Iran is working to re-construct the Iranian Oil Company and to make fundamental changes to its oil policy. Iran has recently abolished the monopoly of crude oil exporting by the National Iranian Company and started contracting private oil exporting companies that have greater abilities to sell Iranian oil. Iran is also making it difficult to track its oil exporting destinations by switching off the tracking devises attached to their oil tankers, changing the names of those tankers and the flags they carry all in attempts to make it harder to track down the tankers. Iran is hiring private oil vessels to store oil near some South- Asian islands to be sold later at cheaper prices.

In order to fund infrastructure projects especially those related to developing its oil industry, Iran is keeping 20% of its oil selling revenues to finance the National Development Fund. The National Iranian Bank has also issued bonds, worth of $10 billion, for an initial public offering (IPO) and announced the selling of some of the Ministry of Oil assets worth of about $10 billion to develop marine oil fields in the Gulf.

Exchange with gold

In an attempt to cordon the Rial crisis, Iran has worked hard last year to buy gold from neighbouring countries such as Turkey, Iraq, UAE and India. Iran has bought from Turkey alone what is worth of $3 billion of gold. According to the report Iran is funding some of its transactions such as buying commodities through exchanging gold for its need of rice, sugar, tea and other commodities for the Iranian markets.

The deterioration of Iranís currency up to two thirds of its value has weakened Iranís capacity to develop its infrastructure and participated in the attrition of its economy. Iranís imports of commodities has halved due to Iranís banks incapability to transfer money to exporters. Iran is importing its needs of goods and services by offering exceptional terms on its light and heavy crude oil exports. Iran has offered countries like India for example selling its oil in Rupees instead of dollars in order to sell as much as possible of its most needed for the economy oil.

Public anger and political divisions

The International Centre for Development Studies report confirmed the presence of widespread feelings of anger among the Iranian society about their government policies that led to crises in economy and hardships in everydayís life in the country. According to official reports inflation has risen by 25% and unemployment by 20%. The Iranian government is trying to win the hearts of their angry people by lowering the costs of energy through increasing the use of natural gas by 15% annually and lowering the daily dependency on petrol by 4%. Iran is also planning to turn from an importer of petrol to an exporter but is facing major problems in finding new markets for its products and in financial transactions.

Iran is trying to lower the industrial costs of some production sectors as its moving towards stopping its imports of steel estimated of 7 million tons annually and working to increase its domestic production of steel by 8% annually. However, many sectors are deteriorating due to the lack of purchasing power and high costs of imported raw materials which has led to many factories and industries stopping production and as many as 120 thousand workers dismissed from work within less than a year of the trade sanctions. Cars production is down by 40% with more than half a million Iranian workers are at the risk of losing their jobs because there is not enough money to carry on production or to pay their salaries.

The report points out that the continuation of sanctions on Iran has caused many divisions among the Iranian regime especially following massive criticism to the Iranian Central Bank policy to maintain the price of the local currency that has lost two thirds of its value amid a government performance that was described, by some Iranian politicians, as falling short from handling the origins of the crisis especially in the sectors of lending and investments that led the oil market losing its ability to attract companies. This was obvious during the oil and gas expo that took place recently and witnessed a fall of participation by 35% compared to the previous year.

Running forward and creating crises

As the report mentioned, if Iran is to sense real dangers and lose control over its angry society then it will keep on creating more crises in the Gulf. It is not excluded that it might close the Strait of Hormuz or creates more tensions in the Middle East.

Iranís policy has been emphasising on the availability of oil in the oil market and rising its prices to put pressure on international economy but with the poor development levels at the international markets makes this policy incapable of achieving its aims. Iranian economy is expected to lose more than $42 billion annually especially now that China, South Korea, Japan and India have announced that they will cut down or stop importing Iranian oil in various percentages but of a minimum of 20%. If this situation will continue the Iranian Central Bank will lose its reserves of hard currency.
This will lead to the collapse of the financial institutions that the Iranian revolutionary guards need to carry on with its funding, training and paying of salaries. In turn this can cause a real revolution that topples the Iranian president Ahmidinejad to whom opposition is growing even among members of the Iranian regime.


For more information, please contact:

The International Centre for Development Studies
Public Relations Dept.
Tel.: +44 203 700 8940
Website: http://www.icdstudies.com
E-mail: mail@icdstudies.com

© Press Release 2013

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