Iran struggles to expand economy after promising negotiations

Ever since November’s Joint Plan of Action (JPOA) deal in Geneva to ease economic sanctions on Iran, the country has begun to export its petroleum reserves far above levels permitted even by the eased sanctions. This month marks the fifth month to see that limit exceeded. Under the current deal, Iran’s current exports are supposed to be held at average 1 million barrels per day, according to ship tracking data, exports have topped that estimate every month, averaging 1.3 bpd in March. Top buyers of Iranian oil include China, India, South Korea, Turkey, and Syria. Syria is unsurprisingly not party to the sanctions on Iran.

Despite the increase in exports, Hassan Rouhani faces an uphill battle to heal the battered Iranian economy. One of his less popular initiatives is to end massive state subsidies that keeps fuel prices low, a move which will almost certainly cost him important political capital with both moderates and hardliners who are still uncertain about the impending nuclear deal (which P5+1 powers indicate will be negotiated and take effect by July of this year). Iranian gasoline prices currently stand at only about 7,000 rials, equivalent to about $1.28 per gallon. Rouhani’s reason for slashing subsidies is to free up the cash-strapped government so that it can invest in Iran’s decaying infrastructure, and to encourage private lending to Iranian companies.

Companies from the EU, at the behest of the Rouhani’s government, have been courting investment opportunities since the first round of the P5+1 Negotiations began earlier this year in Vienna. Iran trade official Akbar Torkan confirmed that a new oil terminal will be built this year in Oman at Bandar Jask. Iran’s sole export facility is at Khark Island, and is extremely vulnerable to potential disruptions in shipping in the Strait of Hormuz. The United States Navy 5th Fleet is stationed in Bahrain, and it has been suggested several times throughout the past few years that Iran would blockade the strait in order to browbeat Western powers into easing sanctions. Luckily, with the nuclear negotiations in full swing, tensions seem to be easing on that score.

News Briefs:

  • Representatives from both the Afghan and Tajik Ministries of Industry signed agreements on cooperation agreements that will include telecommunications, satellite and traditional communications. The impetus for the agreement was the lack of investment in the arts, media publishing and culture studies in both countries.
  • Payvand reports on possible hardships in Iran-P5+1 negotiations that may be exacerbated by the current state of Russia-US relations. In a report on the subject, Shireen Hunter reports on the possibility that existing tensions may provoke Iran into becoming more obdurate, and, in doing so, complicate existing compromises between Tehran and the West.
  • Kyrgyzstan has invited representatives from the Azerbaijani mining industries to invest into existing Kyrgyz mining deposits. The move represents the latest in a series of moves made by the Kyrgyz government to diversify investment in the economy and create further competition in the Kyrgyz economy.
  • Mongolia has invested heavily in non-fossil energy sources, including wind energy. Officials in Ulan Bator have reiterated a need for diversified energy sources and, as such have allowed foreign companies generous contracts to begin establishing wind farms, such as the Sainshand wind farm, which was recently established by German company Ferrostaal Industrial Projects.

 

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