Major Iraqi Bank Eyes Iran Branch

Major Iraqi Bank Eyes Iran Branch

Rasheed Bank, the second largest bank of Iraq, has requested to open a branch in Iran, Mohammed Shia al-Sudani, Iraq’s acting minister of industry and minerals, said. Noting that there are five active branches of Iranian banks in Iraq, the Iraqi official hoped that the Central Bank of Iran will approve Rasheed’s request, quoted him as saying during his Sunday meeting with Iran’s Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh. Bank Melli Iran has three branches in Baghdad, Najaf and Basra. Parsian Bank also has a branch in Baghdad. In May, Iran’s Tourism Bank also opened an office in Najaf. CBI had named Iraqi Islamic Cooperation Investment Bank as one of the five licensed banks in Iran. Iran was Iraq’s third biggest trading partner in 2016.

TCCIM Discusses Interest Rates, Double-Digit Inflation

TCCIM Discusses

Aroundtable meeting was held at Tehran Chamber of Commerce, Industries, Mines and Agriculture to discuss bank interest rates and their potential consequences, as well as the return of double-digit inflation rates, review statistics and provide solutions.

In the meeting attended by executives from various sections of the money and capital markets, the director of new financial instruments at Iran Fara Bourse (over-the-counter exchange) began by analyzing the factors sustaining high bank interest rates in Iran and put forth suggestions to overcome their consequences.

Alireza Tavakkoli added that the Iranian financial market was worth 12.588 quadrillion rials ($335.6 billion) two years ago while 66% of its value belonged to the credit market i.e. bank loans and debt bonds, with the rest going to the stock market consisting of exchange and over-the-counter exchange trading.

In that year, bank loans dominated the credit market with a 96% share.

In the previous fiscal year that ended in March, the financial market’s worth reached 14.589 quadrillion rials ($389 billion) but the share of the stock market shrunk to 28%. While bank loans’ share of the credit market decreased by 3%, they still reigned over it with a 93% share.

During the first three months of the current fiscal year (March 21-June 21), “the share of credit market from the overall financial market reached 73% with a miniscule increase while the share of the stock market decreased by 1% to stand at 27%,” the official said.

Tavakkoli noted that the volume of bank loans experienced a 25% hike during the previous fiscal year and reached 9.866 quadrillion rials ($263.1 billion).

“In the same period, the share of debt bonds also increased by 94% and reached 694 trillion rials ($17.3 billion) from the previous 358 trillion rials ($9.5 billion), but in spite of this increase, it still holds a minor 7% share of the credit market,” he said.

The rise in the share of debt bonds is due to the government policy of issuing bonds to repay its debt, a policy some fear will have an adverse affect on bank interest rates.

Referring to the rise in the share of debt bonds as “a serious threat for the debt market” because the rates of bonds are not transparent and lack supervision, Tavakkoli said they are being traded at the rates of between 28-60%.

To counter their negative effects, he proposes the formation of a secondary market.

As for ways of reducing bank interest rates, he stressed that as the marketer of government bonds, the Central Bank of Iran must play an effective role while managing the dire situation of uncertified credit institutions.

He also pointed to rating of banks, public disclosure of ratings, directing people’s small deposits toward debt markets and establishing a foreign exchange bourse market with the aim of attracting foreign investors as other solutions.

Abbas Argon, a member of TCCIM’s board of representatives, echoed Tavakkoli regarding illegal credit institutions, stressing that an effective control over them will help reduce the interest rates, as “they currently hold more than 1 quadrillion rials ($26.6 billion) worth of people’s liquidity”.

Bank Pasargad board member, Mostafa Beheshtiroo, said the lenders are not to blame for the problems of banking sector, noting that regulations related to labor, taxes and currency rates are “the root of economic problems”.

Providing a counter argument, TCCIM’s board of representatives member, Seyyed Hossein Salimi, dismissed the idea that the banks are blameless, noting that their speculative activities in the past, such as entering the housing market, coupled with establishing too many branches, have created many problems.

Return of Double-Digit Inflation

The second part of the meeting revolved around inflation concerns, as the CBI announced late June that the average goods and services Consumer Price Index for urban areas in the 12 months ending June 21, which marks the end of the Iranian month of Khordad, increased by 10.2% compared with last year’s corresponding period.

“The change effectively ended months of single-digits average CPI growth considered by many as one of the biggest achievements of President Hassan Rouhani’s economic team while the same month of last year had registered the lowest point-to-point inflation rate,” TCCIM’s deputy for economic analyses, Maryam Khazaei, said.

Reviewing the conditions of inflation rate, she also referred to the latest International Monetary Fund report indicating that Iran will have to again grapple with a double-digit inflation rate in 2017.

Noting that the volume of non-sight deposits jumped significantly last year, Khazaei criticized CBI for not publishing monetary variables on time and called on it to disclose them “without current limitations, completely and on time”.

Japan’s Toyo Signs Agreement to Develop Iran’s Salman Field

Develop Iran's Salman Field

Japan’s Toyo Engineering Corporation on Monday signed an agreement with the National Iranian Oil Company and Petropars to develop the offshore Salman oil and gas field in the Persian Gulf.

NIOC deputy chief, Gholamreza Manouchehri, Petropars CEO Hamid Akbari and Hiroshi Sato, a senior executive of Toyo, signed the preliminary agreement in Tehran on Monday, NIOC’s news portal reported.

The agreement is aimed at increasing natural gas production and renovating the field’s facilities.

Based on the agreement, Petropars, a subsidiary of NIOC, will finance the feasibility studies of Phase 1 and Toyo will bankroll operational costs of Phase 2 of the project.

Salman field is located 142 kilometers south of Lavan Island off Hormozgan Province in the Persian Gulf. It stretches into the UAE territorial waters. The field contains several layers of crude oil as well as a gas layer.

Iran is currently pumping 60,000 barrels per day of crude and a little over 2.2 million cubic meters of gas from the field, according to the latest production data.

In comparison, the country draws more than 50 mcm/d of gas from a standard phase of South Pars, the world’s largest gas field shared between Iran and Qatar in the Persian Gulf. Salman’s recoverable crude oil reserves are estimated at around 500 million barrels.

Established in 1961, Toyo is a Japanese engineering, procurement and construction company operating mainly in oil, gas and petrochemical sectors. Most of the company’s operations are based outside Japan, including in China, India, Indonesia, Iran and Russia.

Toyo offers wide-ranging services, including design, engineering, equipment procurement, construction, test operations and technical guidance in the fields of chemicals, petrochemicals, oil refinement, natural gas, electric and nuclear power, medical facilities and biotechnology.

The agreement with Toyo marks the second deal signed by Petropars this month on developing oil and gas fields.

Hailed as the largest Iranian exploration and production company, Petropars signed a deal on July 3 to develop Phase 11 of South Pars Gas Field alongside French energy major Total and China’s state-controlled CNPC. Petropars is a minority stakeholder in the gas venture.

Salman’s History

The first crude oil production from Salman dates back to over 50 years. Output reached a peak level of 234,000 barrels per day during 1973-78 but production gradually declined, as the field continued to age.

But efforts to raise the recovery factor at Salman oil and gas field have largely been futile since early 2000s.

According to an NIOC report, Iran has failed to boost production from the joint reservoir due to a mix of factors, including financial constraints, failure of contractors to meet their ends as well as sanctions that stripped Iran of cash and know-how to develop the field.

CBI Notifies Key Job Creation Directive

CBI Notifies Key

The Central Bank of Iran has notified an executive directive to seven banks for allocating a major portion of their annual budgets for creating sustainable jobs through loans and incentives.

“The executive directive for clauses A and B of Note 19 of the 2017-18 annual budget has been notified to Bank Melli Iran, Bank Sepah, Bank Refah, Bank Mellat, Bank Saderat, Tejarat Bank and Cooperative Development Bank for implementation,” CBI announced on its official website.

The two clauses allow the government to devise policies and plans for creating new and sustainable jobs and use the support of various organizations, banks and executive branches in line with “democratizing the economy, maximizing economic participation, employing the vast potentials of the active population of the country and using the competitive capacities of various regions in Iran (by prioritizing rural and underprivileged regions)”.

To do this, the administration of President Hassan Rouhani must devise and communicate investment priorities for different fields of activities in provinces in collaboration with the private sector and cooperatives, create capacities for the active participation of target communities through executive entities and create potentials in rural regions and target communities.

The budget also bounds the government to disclose information on financial incentives, utilize each of its executive entities to continuously and comprehensively provide financial support, promote recovery in housing, construction and public services sectors, and prioritize small- and medium-sized enterprises and handicrafts for allocation of incentives.

As the budget itself asserts, the executive directive includes “forms of financial support depending on regions, amount of loans and legal and real persons” based on suggestions made by the Management and Planning Organization and in collaboration with relating executive entities i.e. the central bank.

The executive directive notified by the CBI indicates that after the approval in expert committees of the High Council for Employment, projects eligible for loans will be introduced to the seven agent banks by the employment task groups of their respective provinces.

The agent banks will then review and approve or disapprove the loans for a project at most within a month from the completion of the related documents “within the framework of banking regulations, which correspond with rates approved by the Money and Credit Council”.

MCC, a top-tier financial decision-making body with the CBI, set bank interest rates at 18% in its meeting of last July.

According to the CBI directive, if the applicant for the loan is eligible to receive subsidies, the amount of the subsidy will be wired to the account of the applicant by the Ministry of Cooperatives, Labor and Social Welfare at the end of the project.

In conclusion, the seven agent banks have been obligated to send monthly performance reports on projects and the use of loans to the central bank.

Shaheed Rajaee Port Throughput Up 5%

Shaheed Rajaee Port

More than 27.9 million tons of oil and non-oil goods were loaded and unloaded in Shaheed Rajaee Port during the first four months of the current Iranian year (March 21-July 22), registering a 5% increase compared with the corresponding period of last year, the director general of Hormozgan Ports and Maritime Organization said.

“Non-oil products accounted for close to 18.7 million tons of the total sum and oil products for the remaining 9.21 million tons,” Allahmorad Afifipour was also quoted as saying by IRNA.

Afifipour noted that during the period, 1,291 vessels entered the port, 1,080 of which weighed over 1,000 tons.

The strategic port located in the southern Hormozgan Province accounted for some 60% of all Iranian port activities last year (March 2016-17).