Dalga Khatinoglu, Trend Agency's Iran Service Head
Just less than one month after winning the Iranian election, President-elect Hassan Rohani faced the most stringent new round of sanctions the U.S. has ever imposed against the country.
The law signed in January as part of the annual national defence authorisation act, targets Iranian energy, shipping and shipbuilding sectors barring the sale, supply or transfer of 'significant' goods or services by non-U.S. companies and also Iran's national currency, rial, WSJ reported on July 1.
Rohani, whose victory in election race was won with a 'moderate policy and eliminating the nuclear dispute' slogan, has been welcomed by both the Iranian opposition and international community, it is not clear how he would he realise Iranians hope for the elimination of sanctions and solving the economic problems?
President Ahmadinejad's legacy for Rohani includes a 1.9 per cent economic contraction in 2012, over three million unemployed citizens, 40 per cent closed industry unions, $400 billion debts, a $60 billion deficit in last year's budget based on the USD's official rate in Iran, 32 per cent inflation, halved crude oil export and a drop in the value of the national currency by 40 per cent in 2012, alongside blocked $100 billion worth of assets in foreign countries.
Consequences of new imposed sanctions
Iran has started bartering oil with cargoes after the EU and U.S. banned the Central Bank of Iran, but it stipulates the value of the deal calculated in the national currency or dollar-euro based on their exchange rates against the rial. Then, there is no clarity of the density of contracts or deals, while the U.S. sanctioned Iran's national currency making it able for Washington to blacklist foreign financial institutions conducting significant transactions involving the currency.
The other issue is banning auto details export to Iran. The country's auto production has decreased by 56 per cent in May compared to the same period in 2012 and it's auto export dropped from about 6000 in March 20-May20, 2012 to 1000 cars in same period in the current year.
According to statistics, about 69 auto manufacturer units have been closed and 115,000 people lost their jobs in auto sector during the past 2 years.
Coming to the shipping sector, only a month before enforcing U.S. sanctions, all 36 international companies with direct cooperation halted deals with Iran's major cargo port Shahid Rajaee, Deputy of Tidewater Middle East Maritime Company, Alireza Cheshmjahan confirmed on June 28.
Banning gold exports to Iran is also included in the list of the new round of sanctions imposed by the U.S. over Iran. The country exported about $3.5 billion worth of gas to Turkey during last year, Managing Director of National Iranian Gas Company Javad Owji announced in April. Iran sells gas to Turkey using Turkish lira, then buys gold and imports gold directly or via a Dubai route.
However, according to Turkey's official statistics, this country exported $6.5 billion worth gold to Iran in 2012 directly, more than 10 times the level of 2011. On the other hand the amount of Turkish exported gold to the United Arab Emirates rose from $280 million in 2011 to $4.6 billion in 2012 with allegedly much of it shipped to Iran.
Gold is vital for Iran to pay off its cargo imports. Official statistics released by Custom Administration on July1 indicate a drop of 26 per cent in Iran's imports during the first quarter of Iranian solar year which began on March 20 compared to the same period last year.
Ahmadinejad's denial policy
Iranian president Mahmoud Ahmadinejad said its administration worked 27 times more effectively than his predecessors on June 30.
The administration of Ahmadinejad, which has been the source of 70 per cent of the economic problems according to prominent principals, is now pursuing a policy of denial. The administration once referred to international resolutions and sanctions as the cause of economic progress and hinted at them as just pieces of worthless paper.
First vice president Mohammad-Reza Rahimi said on July 1, "We are in good relations with the world."
Referring to a decline in Iran's oil sales from what he said "2.3 million barrels per day to less than 1mbpd", Rahimi underlined that: "We managed to compensate the reduction through selling non-oil products."
Iran's non-oil exports including gas condensates hit $41 billion in the past Iranian calendar year which ended on March 20. The loss of a 1.3 million barrel fall in oil sales even at $100 per barrel is much more than the country's total non-oil exports.
On Monday, the Customs Administration of Iran reported that exports of gas condensates and petrochemicals dropped by 48 present and 35 per cent in the first quarter of the current Iranian year compared to the same period last year.
Gas condensates and petrochemicals account for half of Iran's non-oil exports which totalled $10 billion in the first quarter. The question is how the administration will materialise the target of $59 billion annual non-oil exports (monthly $5 billion) for the current year?
FDI hits record in Iran?
Some high ranking officials in Iran have repeatedly mentioned UNCTAD's latest report about attraction a $5 billion foreign direct investment (FDI) by Iran during 2012 as a country's victory to overcome the sanctions and good condition of the country's economic performance.
According to the latest statistics released by the United Nations Conference on Trade and Development (UNCTAD) on June 27, Iran could attract foreign direct investment worth $4.2 billion in 2011, while this figure increased by 17 percent in 2012, reaching $4.87 billion.
Iranian officials say that the total attracted foreign direct investments (FDI) during Mahmoud Ahmadinejad's two term presidency (2005-2013) hit record compared to previous governments.
The Organization for Investment, Economic & Technical Assistance of Iran's (OIETAI) statistics indicates that during Ahmadinejad's presidency, some $24.4 billion of FDI have been attracted, while this figure for his predecessors Mohammad Khatami (1997-2005) and Akbar Hashemi Rafsanjani (1989-1997) hit $10.452 billion and $350 million respectively.
UNCTAD didn't report the details of attracted FDI by Iran, but this entity recognizes any absorbed investment in a country by a company which is registered in overseas as foreign investment, in other word, putting investment of any company (Iranian or non-Iranian) in Iran which is registered in a foreign country is calculated as FDI.
For instance, Iranian businessman Babak Zanjani, who has been blacklisted by the U.S. in March and four months before that by EU, told BBC Persian broadcast in early March 2013 that he transferred about 4 billion euro (equals to $5.19 billion) into Iran. He, who owns 60 companies in several Central Asia and east Asia countries didn't mention the period of transferring the assets, but this figure in even above Iran's absorbed $4.87 billion FDI in 2012.