Iran to use bonds to counteract sanctions
Tamkin Jafarov, Trend Persian Desk Commentator
US President Barack Obama on Monday signed a new decree that puts Iranian oil, gas and petrochemical companies on the United States' "black list". Over several recent months, the United States and Western countries tightened sanctions against Iran in connection with its nuclear program.
As a result of such sanctions, Iran in some latest years has faced hardships in attraction of additional investments required for the development of its oil, gas and petrochemical industries. Despite its attempts to counteract the sanctions in different ways, Iran has not had any particular success.
Owing to the UN sanctions, international companies suspended their actions in the aforesaid industries of Iran in some recent years. They also refused to invest in Iran.
Though Iran encourages international companies to cooperate with the purpose of financing of its internal projects, this wish of Tehran has not come true because of its nuclear program. In such a situation, Iran tried to finance its projects with the help of eastern countries, including China, India, and Malaysia.
However, this also did not meet the expectations of Iranian officials. Though Iran established appropriate conditions for these countries, Iranian officials were not pleased with their activities.
Certainly, the UN Security Council's sanctions troubled companies from eastern countries as well. Owing to this factor, to a significant extent, companies from these countries did not operate successfully in Iran.
Iran saw a way-out from the established situation in development of its oil and gas industry through using the potentials of its own companies.
As viewed by experts, Iran's problems relating to development of oil and gas fields are connected with the two factors: shortage of funds, and technologies' not complied with the existing standards. Even if Iranian companies turn to be able to develop oil and gas fields from technical point of view, nevertheless, financial matters remain a big problem.
To resolve the problems of financing of oil and gas industry, the Government of Iran began to sell bonds. Though the bonds were sold in either rials (Iranian currency) or hard currency, it was difficult to sell them at international markets.
This year (Iranian New Year begins on March 21), Iran will issue bonds worth a total $15 billion for sale, Ahmed Galebani, Director of the Iranian National Oil Company reported in an interview earlier.
He noted that in 2010 the Iranian National Oil Company attracted additional funds in the amount of $17.6 billion, an increase of 90 per cent against previous years. In 2010, the Company sold bonds worth $7.5 billion, Galebani noted.
As reported by the Iranian Oil Ministry, development of the country's oil and gas industry requires $500 billion in investments over next 15 years.
"Bonds worth $29.5 billion were sold in the country in 1994-2010," the headline of an article published by Iranian newspaper Abrar on November 22. Bonds worth $15.7 billion were sold in 2010, the article said. According to the newspaper, the sale of bonds plays the major role in attraction of additional funds to Iranian financial market and in development of production.
Over the period, the earnings obtained from the sale of bonds were spent primarily for construction of a hydro power plant, enhancement of the out-date infrastructure, petrochemistry, and development of gas fields.
As viewed by experts, Iran will not be able to develop its oil and gas industry at the price of internal funds only. Even if Iran turns to be able to get the necessary funds at the expense of its internal capabilities, anyway it will have to import equipment from other countries, which will require additional expenditures.
Naturally, Iran seeks new methods to provide its oil and gas industry with the needed funds. Starting from today, oil produced in the country is sold to the population preliminarily at the price of bonds. Citizens first pay money for 10 barrels a person, and the money obtained in this way is further invested in the development of oil and gas fields. Whether this method is efficient will become clear later. Iranian officials call this method an innovation in attraction of investments.