Iran Makes A Far-Fetched Claim Of 580-Percent Rise In Oil Revenues

Chairman of the Board of the German Federal Association for Economic Development and Foreign Trade (BWA) Michael Schumann attended a meeting with Iranian lawmaker Ehsan Ghazizadeh Hashemi and Iran's ambassador to Germany Mahmoud Farazandeh as well as Alireza Peyman-Pak, the head of Iran’s Trade Promotion Organization on Tuesday. 

According to the Iranian government’s website IRNA, Schumann said trade relations with the Islamic Republic can be expanded regardless of political issues. He welcomed the establishment of the Iranian trade center in Berlin, and called for allocating more space to German businessmen at expos in Iran.

The report quoted him as saying that sanctions imposed on the Islamic Republic have proven to be more detrimental to the German businessmen than their Iranian counterparts. 

On July 21, the British ambassador to Iran also highlighted business opportunities to boost UK-Iran trade regardless of the result of the talks to restore the 2015 nuclear talks, known as the JCPOA (Joint Comprehensive Plan of Action). “Just back from Shiraz with our Trade Team... Plenty of great companies in Fars, with opportunities for quality UK products & services to boost UK-Iran trade, JCPOA or not,” Simon Shercliff tweeted. 

Asked during a briefing about the British Ambassador’s remark, Spokesperson Ned Price referred to shared goals with European allies to uphold US sanctions until there is anuclear agreement with Iran.

He highlighted that the annual inflation rate has jumped from 40 to 60 percent during Ebrahim Raisi’s first year in office, and the vast majority of people face incredibly hard financial conditions.

Raisi, a hardliner cleric, with no relevant experience, became president in early August 2021, with the support of Supreme Leader Ali Khamenei and his loyal followers among the military and conservatives.

Marashi, who is a regime loyalist but with business and technocratic background, in an interview with Didban Iran [Iran Monitor] news website on Monday, argued that the Islamic Republic needs to return to its senses and only Khamenei can make this happen.

The current 60 percent inflation figure is based on an optimistic assessment, he noted, adding that pessimists in Iran say annual inflation is over 100 percent. Marashi maintained that Iran’s problems, highlighted by its economic crisis, is beyond the powers of other officials, including the president or parliament to solve.

“No one other than Khamenei can rescue Iran from this crisis,” Marashi sai

d. The remark implicitly hints that Khamenei as top decision maker in major foreign policy, political and economic matters, is responsible for the current crisis.

The main issue dominating debate in the wider Iranian circles is about the nuclear program and the resulting United States’ sanctions that have exacerbated the difficult economic situation. Khamenei is seen as the only real decision-maker on the nuclear issue.

Meanwhile, Marashi ruled out Raisi’s occasional remarks about the former government of President Hassan Rouhani being responsible for Iran’s problems, adding that “Raisi is a non-expert in executive affairs and makes many such uncalculated comments.” Instead, Marashi largely blamed the Raisi administration and particularly his former Labor Minister Hojjat Abdolmaleki’s manipulation of the annual budget bill.

In another development, reformist Ali Mohammad Namazi said in an interview with the conservative Nameh News website that frequent protests in Iran indicate dissent and dissatisfaction. He suggested that Raisi Administration officials should have sat down with the top executives of the previous government to determine the root cause of Iran's problems and focus on solving them rather instead of simply baling their predecessors for all problems form a whole year.

Namazi criticized the Raisi administration for the effective devaluation of the Iranian currency and price rises for medicine, housing and everything else. Iran’s currency is near its all-time low of 320,000 rials to the US dollar, a more than 25-percent drop just since March.

He further criticized the government for its broken promises in the areas of housing and employment. The Raisi administration had promised to build one million apartments and create one million jobs every year. Namazi said that even one-tenth of this promise has not materialized.

Meanwhile he criticized the government's foreign policy, saying that "there is every indication that the talks aimed at reviving the 2015 nuclear deal will not be fruitful, adding that it looks like…either the [UN Security Council] trigger mechanism will be activated, which means even more sanctions, or Iran will be facing a military attack in the future."

The CBI report published last week indicates that in the fiscal year ending March 20, 2022, the country's revenues from exporting oil, gas, as well as oil and gas products and by-products, amounted to nearly $39 billion, $17 billion more than the previous fiscal year when oil prices were much lower.

The 84% increase in oil export revenues, however, was accompanied by a nearly 50% increase in capital flight in comparison with the previous fiscal year (ended March 20, 2021) as trust in the local economy and the political future of the country appeared to have diminished.

According to the latest OPEC figures, Iran earned more than $25 billion from selling crude oil in 2021. There have been numerous reports since late 2020 that Iran has been selling more oil, clandestinely, despite US sanction. Iranian shipments increased from as low as 200,000 barrels per day in 2019 to as high as more than one million barrels in January 2022. In 2020 Iran earned only around $8 billion due to enforcement of US sanctions.

The precise amount of capital leaving Iran is very difficult to calculate but it can be deducted from the official data on net capital account deficit. According to the CBI’s latest report, the net capital account deficit stood at $9.3 billion during the fiscal year ending March 20, 2022.

The hard currency outflow from the country is invested in various ways including in real estate, stocks, bonds, cryptocurrencies, or establishing of companies abroad. Investment in neighboring countries is particularly popular. The high rate of inflation and the huge drop in the value of the national currency have also hugely contributed to the urge to invest in such markets instead of domestic production and services.

In January this year Iran's central bank said that over $6 billion had been taken out of the country in six months (March 21-Sept. 20, 2021) because of political and economic uncertainty.

One of the indications of capital flight from Iran is the popularity of property acquisition in neighboring countries such as Turkey, the United Arab Emirates, and Georgia which often goes hand in hand with business investments.

According to a report by the state broadcaster’s Young Journalists Club (YJC) in April, the value of assets held by Iranians abroad was estimated at between 3 to 4 trillion dollars in 2015, about 10 times the country’s gross domestic production.

Experts say CBI figures indicate that Iranians are fearful about the safety of their investments despite promises of government officials last year that the 2015 nuclear deal, Joint Comprehensive Plan of Action (JCPOA) would be restored.

They argued that the administration of President Ebrahim Raisi does not tie the economy to the outcome of the nuclear talks and restoration of the JCPOA and therefore, the economy would not be damaged even if the talks to restore the deal failed and US sanctions continued.

Iran has also struggled to attract foreign investment since the United States withdrew from the 2015 nuclear deal and slapped sanctions on oil exports, international banking, and officials of the Islamic Republic. Any entity worldwide supplying dollars to Iran is vulnerable to punitive US action.

According to official figures, Iran's net capital account balance was positive from 2001 to 2005 when there was foreign investment. But in the following years, except in 2014, the balance has been in the negative.

Former President Hassan Rouhani and his aides are increasingly challenging Raisi’s claims that he inherited an empty treasury with no foreign currency reserves and a mountain of unpaid bills.

In a speech to former government officials and aides in his office in Tehran July 18, Rouhani claimed that there were billions of US dollars in cash in the Central Bank of Iran when his is administration handed over the treasury to the new administration in August last year.

It should be noted that Iran had already increased its oil exports from the end of 2020, after the incoming Biden administration signaled its intention to return to the 2015 nuclear agreement, the JCPOA, which would mean lifting sanctions imposed by President Donald Trump in 2018. Therefore, the Rouhani administration had about 8 months of higher oil sales when it handed over the treasury.

Economy minister Ehsan Khandouzi finally admitted to reporters on July 20 that the country had a “good cash reserve” of foreign currency when the current administration took over but also claimed that the cash reserves were earmarked for “paying for services” and could not be used for importing goods and “solving the country’s’ trade problems”.

The economy minister’s admission contradicted claims by various government officials during the past year that the Rouhani administration had handed over an empty treasury.

Two months before handing over the government, former vice president Es’haq Jahangiri, had told reporters that the incoming administration would be in possession of the “most unprecedented foreign currency and gold reserves”.

Officials of the Raisi administration claim that his government has not resorted to printing money and has even succeed in reducing the monetary base by 0.5 percent in the three-month period ending June 21 in comparison with the same period the previous year.

Monetary base (MO) is the total amount of a currency that is either in general circulation in the hands of the public or in the form of commercial bank deposits held in the central bank's reserves.

In a tweet Thursday, the former governor of the Central Bank of Iran (CBI), Abdolnaser Hemmati, responded that the Raisi administration’s repeated assertions of not having borrowed money from the CBI to offset its budget deficit were not true as the administration had withdrawn from the accounts of government-owned companies to make payments.

“Tweaking statistics doesn't solve problems and [their effects] come to light within a few months. The outcome of the government’s financial and monetary policies should reveal itself in people’s lives,” he wrote.

In the same speech Rouhani claimed that his administration could have removed US sanctions in 2021 had the hardline parliament not passed the ‘Strategic Action to Eliminate Sanctions and Defend Iranian Nation's Interests’ bill on December 1, 2020, which prevented his government from concluding an agreement with world powers to restore the 2015 nuclear deal known as the Joint Comprehensive Plan of Action (JCPOA).

The Raisi administration has so far failed to restore the deal and lift the US sanctions which considerably affect the country’s crude oil exports and squeeze the government for foreign currency. US Secretary of State Antony Blinken recently said the Biden administration would keep using its authorities to target Iran's exports of energy products.

People in the cities of Darab, Neyriz, and Estahban and about 10 of their surrounding villages in the Fars province were affected by floods.

Hossein Darvishi, the CEO of Red Crescent Society of Fars Province, said 74 people were rescued from the flooded areas.

Estahban’s governor, Yousef Kargar, criticized the province’s meteorological organization for not issuing any warning about the precipitation.

In response to this criticism, the Meteorological Organization of Fars Province said it announced on Wednesday evening, July 20, the possibility of showers and thunderstorms for Friday.

In March 2018, a flash flood in the province led to the death of 44 people.

The director of Crisis Management of the province’s governorate, Khalil Abdollahi, said that at least 15 cars were also stranded in the flood.

Iran has been suffering from drought for at least a decade and this year officials have been warning of a further decrease in precipitation. However, Iran’s metrology department had warned about possibly heavy seasonal rainfall across the country. The dangers of flash floods have been exacerbated by the widespread construction of buildings and roads near riverbeds.