Richard Javad Heydarian writes,
... there are some recent indications that Iran’s economy is not exactly in a desperate shape, or at least not as frail and fragile as the Obama administrations hopes it to be.
According to the Paris-based International Energy Agency’s (IEA) most recent report, Iran’s oil exports have rebounded sharply – by around 30 percent – after seven months of steady decline, thanks to new contracts with giant Asian customers, China and South Korea. With oil exports constituting more than three-quarters of export earnings, Tehran is now in a relatively better position to defend its falling currency. In fact, the rial has indeed experienced some recovery in recent weeks, appreciating from the record-low of 37,000 rials against 1 dollar in early October to around 27,000 rials against 1 dollar today. Of course, the most recent financial and hydrocarbon sanctions by the European Union will further complicate the process by which Iran intends to translate its rising exports into a stronger local currency.
Another surprising development is in the tourism sector, which has also experienced an unexpected spike. “Although most sectors of Iran’s economy are struggling and oil revenue has steeply declined, foreign purchasing power is at an all-time high in Iran due to a plunge in the value of the Iranian currency, the rial,” reported Jason Rezaian of the Washington Post.
The Iranian government has circumvented transatlantic sanctions by an ingenious mixture of manifold countermeasures. It has negotiated sovereign insurance deals with major customers such as China, India, Japan, and South Korea, while considering barter deals (sweetened by heavy discounts and flexible payment arrangements) to woo major customers and continue large-scale oil trade. Iran has also expanded its tanker storage capacity by purchasing/building new oil-transporting vessels, smuggled oilthrough neighboring countries like Iraq, and stealthily transported oil — with off-the-radar and/or or ‘foreign flagged’ ships — from its ports to major destinations in East Asia. This explains Iran’s ability to increase oil exports by almost 30 percent in November, compared to previous months.
Moreover, the government has instituted some draconian measures to stave-off the impact of sanctions. It has further slashed imports, postponed its subsidy cuts, reduced money supply, raised interest rates, and jailed so-called ‘currency manipulators’. It has also encouraged domestic manufacturing. Aside from the government’s recent ban on imports of around 77 luxury products, atop reductions in 52 other non-essential goods, the fall of the Iranian currency — especially in the black market – has also eroded the competitiveness of imported capital goods, which have hammered local producers in recent years.
It’s important to note that the Iranian government has considerable foreign exchange reserves, estimated at between $80-100 billion, giving it significant ability to sustain imports for an extended period and defend its currency amid growing international restrictions. With a multi-tiered foreign exchange system, the government has an ability to cushion the most vulnerable sectors — incidentally, the backbone of the regime – against major disruptions in the import of basic commodities. After all, Iran’s structurally high inflation more the product of a loose monetary policy and major subsidy cuts that begun in 2010.
In some ways, it is Iran’s relative resilience — and ability to avoid a total collapse — that may explain its willingness to explore direct talks with Washington. Tehran feels that it has enough wiggle room to avoid total unilateral concessions and negotiate a more mutually-favorable, face-saving outcome — perhaps, before it’s tool late.
Via: "Lobe Log"
No comments:
Post a Comment