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Economic Trends: March and April

Cameron Glenn

The most significant development in March and April was the nuclear framework announced on April 2 by Iran and the world’s six major powers. They now face a June 30 deadline for converting a blueprint into a final nuclear deal. International investors have begun eyeing Iran in anticipation of sanctions relief. Oil executives in Europe and Asia held preliminary discussions with Iranian Oil Minister Bijan Zanganeh to discuss investments in a post-sanctions environment. The announcement even impacted oil prices, which dropped four percent on April 2.
 
Iran witnessed modest economic improvement by the close of the Iranian calendar year on March 20. Annual inflation decreased to 15.6 percent, and youth unemployment is projected to decrease by about one percent by mid-2015. In a new report, the International Monetary Fund predicted slight growth in Iran’s economy in 2016, though its estimates had been revised down from 2014 projections due to low oil prices.
 
The following is a run-down of the top economic stories with links.
 
Domestic Developments
 
Growth: The International Monetary Fund projected that Iran’s economy will grow 0.6 percent in 2015 and 1.3 percent in 2016. The figures are lower than the October 2014 projections, due to the impact of low oil prices. Iran’s economy grew 2.8 percent between the third quarter of the last Iranian fiscal year and the year before, but the growth was too slow to significantly reduce unemployment and mitigate other effects of international sanctions. "If we have a successful conclusion to [the nuclear] negotiations, we would see more of a positive impact in terms of higher growth, lower inflation, and lower unemployment," said Valiollah Seif, governor of the Central Bank of Iran.

 

 

Taxes: Iran’s tax income rose 49 percent in the first 11 months of the Iranian calendar year compared to the same period last year. Iran’s Finance and Economic Affairs Minister Ali Tayyebnia said Tehran intends to reduce its dependence on oil by improving the tax system.
 
Oil: Oil prices fell four percent on April 2, as Iran and the world’s six major powers announced a nuclear framework that could lift sanctions on Iran’s oil industry, though they rebounded slightly the next day. Even before the announcement, Iranian officials began discussing plans to increase oil production. In March, Oil Minister Bijan Namdar Zanganeh claimed that Iran could ramp up its oil production to pre-sanctions levels “within months” of sanctions being lifted, increasing output by one million barrels per day.
 
Some energy analysts, however, are more cautious. The U.S. Energy Information Administration estimated that Iran holds 30 million barrels of crude oil in storage, and could increase crude oil production by 700,000 barrels per day by the end of 2016, if sanctions are lifted. But Iran would require new investments and greater production capacity to significantly increase output beyond that.
 
Zanganeh also called upon the Organization of Petroleum Exporting Countries (OPEC) to reduce oil production by five percent to offset new Iranian oil on the market and prevent a further drop in oil prices. "We expect the members of OPEC to pave the ground for (an) increase of Iran's oil production that will reach global markets when sanctions are lifted," Zanganeh said in a meeting with the Venezuelan oil minister in Tehran.
 

 

Gas: Managing Director of the National Iranian Gas Company Hamid-Reza Araqi said that Iran exported eight percent more natural gas in the last year compared to the year before, an increase of one billion cubic meters. Araqi also announced that Iran will begin exporting natural gas to Iraq in late May, and will explore the possibility of exporting gas to Kuwait in the future. In April, Zanganeh announced that Iran plans to increase gas production to 200 million cubic meters per day by April 2016. “This is what we planned by assuming that the sanctions will remain in place,” he said. “If the sanctions are removed, things will proceed much faster.”

 

 

Inflation: The inflation rate dropped to 15.6 percent by the end of the Iranian year, down from more than 40 percent two years ago, according to the Central Bank of Iran. In response, Iranian banks announced they will cut lending rates by at least two percent. Akbar Komeijani, a deputy governor for the Central Bank of Iran, said “the rates need to be lowered in pace with the drops in the inflation rates so there would be a better balance between developments in the national economy and the return of investments in various markets.”
 
Unemployment: Iran’s youth unemployment rate is expected to drop from 25.7 percent to 24.7 percent in the second quarter of 2015, according to Trading Economics.
 
Banks: Iranian bank lending to businesses increased significantly in the past year. Lending spiked by 35 percent, and businesses borrowed $94.2 billion between March 2014 and March 2015, exceeding projections.
 
Stock market: The Tehran Stock Exchange surged more than eight percent in the five days following the April 2 announcement.
 
Car production: Car production increased 58 percent in the first 11 months of the Iranian fiscal year.
 
International Developments
 
Russia: Russia has taken several steps to solidify economic ties with Iran in the wake of the April 2 announcement. In April, Russia began implementing an oil-for-goods deal with Iran. “In exchange for Iranian crude oil supplies, we are delivering certain products,” said Russian Deputy Foreign Minister Sergei Ryabkov. “This is not banned or limited under the current sanctions regime.” Moscow and Tehran had been negotiating the deal since early 2014. Iran and Russia also signed an agreement to create a joint body to regulate financial transactions between the two countries, which will help reduce the effects of international sanctions.
 
On April 13, Russian President Vladimir Putin signed a decree lifting a ban on the sale of advanced air defense missile systems to Iran. Russian Foreign Minister Sergei Lavrov said that the embargo was no longer necessary given progress in nuclear talks between Iran and the world’s six major powers.
 
 
United States: The U.S. Census Bureau reported that value of goods traded between the United States and Iran amounted to $30 million in January and February, up from $24.2 million during the same period the previous year.
 
With the prospect for a nuclear deal, American companies are also exploring the potential of the Iranian market. On April 16, a delegation of 22 American businessmen and investors made a rare visit to Tehran to discuss post-sanctions business opportunities. U.S. car manufacturers have also reportedly indicated an interest in Iran’s auto industry. “The Americans have expressed willingness for presence and investment in Iran’s market, and they are waiting for the Lausanne statement to become an agreement,” said Mohammad Reza Najafi-Manesh, member of Iran’s Car Manufacturing Policymaking Council.
 
Sanctions: Deputy head of Bank Melli Iran for International and Foreign Affairs Gholam Reza Panahi met with European bank representatives in Tehran in April to discuss resuming financial transactions if sanctions are lifted. “Once sanctions are removed, the ground will be prepared to provide brokerage services as well as international money transfer and other banking services for imports and exports,” he said.
 
China: Oil Minister Bijan Namdar Zanganeh affirmed China’s role as a key energy partner for Iran. China is the largest buyer of Iranian crude oil, and Iranian oil accounts for 12 percent of China’s annual oil consumption. Officials have indicated that sales of Iranian oil to China would likely increase if sanctions are lifted as part of a nuclear deal, even with more potential buyers on the market.
 
Trade: Iran exported $49.74 billion and imported $52.48 billion in goods over the past 12 months, according to the Iranian customs office. The value of exports increased by nearly 19 percent compared to the previous year. On March 18, President Hassan Rouhani announced that non-oil exports exceeded expectations, despite international sanctions.
 
Switzerland: A Swiss business delegation met with Gholam Hossein Shafei, head of Iran's Chamber of Commerce, on April 28. The two sides discussed expanding bilateral trade. "We would like to find out how the Iranian government wants to proceed until negotiations are concluded, and after sanctions are lifted," said former Swiss ambassador to Iran Livia Leu, who accompanied the delegation.
 
Germany: A group of German businessmen met with senior Iranian officials for the second time in several months to explore investment opportunities if sanctions are lifted. Shafei said that Germany could potentially become a reliable trade partner for Iran's saffron, carpet, and dried fruits exports.
 
France: France’s Total indicated that it would be interested in reviving oil and gas investments in Iran, if sanctions are lifted. “Iran has the world’s second largest gas reserves after Russia, and we will consider returning to this country once sanctions are lifted,” said Total CEO Patrick Pouyanne.

 

 

Turkey: On April 7, Rouhani and Turkish President Recep Tayyip Erdogan signed eight agreements to increase bilateral trade, aiming to increase trade volume to $30 billion by the end of 2015. Iran imported $875 million in commodities from Turkey – including gold, jewelry, produce, and leather goods – in the last quarter of the Iranian year, ending on March 20. But Ankara rejected Tehran’s offer to double Iran’s natural gas exports to Turkey at a discounted price. Turkey imports around 27 billion cubic meters of natural gas from Iran each year, accounting for 95 percent of Iran’s gas exports.
 
Asia: Iran is reportedly in talks with three Asian buyers to increase crude oil sales if sanctions are lifted.  
 

 

Tags: Economy

Iran Charges Rezaian with Espionage

Washington Post journalist Jason Rezaian, arrested nine months ago in Iran, is reportedly being charged with four crimes. A statement from Rezaian’s lawyer provided to The Post by his family said the charges include espionage, “collaborating with hostile governments,” and “propaganda against the establishment.” One example of communication with a “hostile government” cited in the indictment included writing to President Obama. Iran’s Revolutionary Court, which is responsible for national security cases, has also accused Rezaian of collecting classified information.

President Obama, Secretary of State John Kerry and other U.S. officials have called on Iran to release the journalist, who is a dual U.S.-Iranian citizen. “If the reports are true, these charges are absurd, should be immediately dismissed, and Jason should be freed immediately so he can return home to his family,” White House Press Secretary Josh Earnest said on April 20.
 
But Iran’s government does not recognize dual citizenship. The maximum sentence would be 10 to 20 years in prison for the charges. Rezaian’s lawyer, Leila Ahsan has only been able to divulge limited information because the trial has not yet begun. She has only met with her client once for 90 minutes since he was detained in July 2014.
 
“Jason is a journalist, and it is in the nature of his profession to gain access to information and publish” it, Ahsan said in a statement about the case. “My client, however, has never had any direct or indirect access to classified information to share with anyone.”
 
Rezaian and his Iranian wife Yeganeh Salehi, a correspondent for the Emirates-based paper The National, were detained in late July 2014. But Salehi was released on bail during the first week of October.
 
On the margins of nuclear negotiations with Iran, U.S. officials have repeatedly raised Rezaian’s case along with the status of three other Americans also detained or missing in Iran. “We raise it in every round of meetings we have,” State Department Spokesperson Marie Harf told the press on April 21. Saeed Abedini has been held for two and a half years on charges related to his religious beliefs. Amir Hekmati has been imprisoned on espionage charges for more than three and a half years. And Robert Levinson went missing on Kish Island more than eight years ago.
 
The following are excerpted remarks by U.S. officials and members of Congress on the case.

White House Press Secretary Josh Earnest
 
MR. EARNEST: Let me start by saying that while the United States is not aware of any official announcement yet from any Iranian judicial authorities, we have seen reports that U.S. citizen Jason Rezaian has been charged with espionage and other security-related charges.  If the reports are true, these charges are absurd, should be immediately dismissed, and Jason should be freed immediately so he can return home to his family.  So we’re going to wait until we see some more official announcement from Iranian judicial authorities before we comment further on this case. 
 
More generally, let me repeat something that I said before, which is that the ongoing effort to try to prevent Iran from obtaining a nuclear weapon through diplomacy will not, if it succeeds, resolve the wide range of other concerns we have about Iranian behavior.  I mentioned earlier in response to Nedra’s question our ongoing concerns about Iran’s destabilizing activities in the region, including shipping arms to the Houthis, for example.  We continue to be concerned about Iran’s support for terrorism and Iran’s language that currently emanates from their leadership that threatens our closest ally in the Middle East, Israel.  And we continue to  have concerns about Mr. Rezaian and other Americans who are being unjustly detained in Iran.
 
One thing that we have done, Mike, that you know, in the context of the talks is raised on the sidelines of those talks our concern about the status of these American citizens.  And we’re going to continue to press that case as we move forward here.
 
QUESTION: Josh, on the Jason Rezaian case, why can’t you just say to the Iranians that as a condition of making this deal final, you’ve got to free Jason Rezaian?  I understand you’re going to resolve all of your issues with Iran, like supporting terrorism throughout the region -- all of those issues that are very complicated perhaps; some would argue maybe not.  But here you have one case of an American who’s been held prisoner since July of last year, now brought up on what you just said were absurd charges.  Why not say, look, we’re not going to sign a deal until you let him go?

MR. EARNEST: The reason for that, Jon, simply is that the effort to build the international community’s strong support for a diplomatic resolution, or a diplomatic agreement that would shut down every pathway that Iran has to a nuclear weapon is extraordinarily complicated.  And so we’re trying to focus on these issues one at a time.  And that’s why you continue to see regular, consistent and pretty forceful statements from the United States that these Americans should be released, while at the same time we are working with our P5+1 partners and other countries around the world to compel Iran to sign on to the dotted line and agree to shut down every pathway they have to a nuclear weapon, and cooperate with the most intrusive set of inspections that have ever been imposed on a country’s nuclear program.
—April 20, 2015 during a press briefing 
 
QUESTION: Josh, coming back to another category of egregious behavior by Iran, we talked about Jason Rezaian yesterday.
… 
I understand -- we’ve been over this many times -- you're not going to make the release of these Americans a condition for having a final deal on the nuclear matter, but is the administration willing to impose some serious consequences on the Iranian government for taking these Americans under what appear to be specious charges?
 
MR. EARNEST: Well, I don't want to speculate about any possible future action, but I will say something that's similar to what I said before, which is that we continue to be very concerned about the unjust detention of a number of Americans inside of Iran.  We have made those concerns known in quite public fashion.  We’ve also made those concerns known privately, directly with the Iranian leadership.  As recently as a month or two ago, Secretary of State John Kerry on the sidelines of his nuclear negotiations with his Iranian counterpart raised his concerns about this unjust detention.
So we’ve made very clear to the Iranians that we're concerned about the treatment of Americans inside of Iran, and that this continues to be a high priority for U.S. foreign policy.
—April 21, 2015 during a press briefing 
 
State Department Spokesperson Marie Harf
 
QUESTION:  I’m wondering if you have any thoughts/reaction to the charging of Washington Post reporter Jason Rezaian by Iran. And then I’d like to stay on Iran for a little bit.
 
MS HARF: So we are still not aware of any official announcement yet from Iranian judicial authorities. I understand these reports are coming from his lawyer. We have seen the reports, of course, from his lawyer and others that he has been charged with espionage and other security-related charges. If the reports are true, these charges are, as we’ve said in the past, patently absurd. He should immediately be freed so he can return to his family. The charges should immediately be dismissed. But again, no confirmation officially from Iranian judicial authorities yet.
 
QUESTION: Quick one on this one. Is it possible for him to renounce his Iranian citizenship? Do you know anything about that?
 
MS HARF: I don’t know, Said. But regardless of that specific fact, and I just don’t know the answers there, these charges that he’s allegedly been charged with are just absurd as I said and he should be freed immediately.
 
QUESTION: The other thing having to do with Iran – I realize that these are separate, the issue of the Americans detained – are separate from the nuclear talks. Although, as you and others have said as does come up – this issue does come up on the –
 
MS HARF: We always raise it in every round. That’s correct.
 
QUESTION: So I’m wondering: Does this give you any pause about going full-throttle ahead with the negotiations?
 
MS HARF: They really are separate issues.
 
QUESTION: Well, but they had been brought up on the –
 
MS HARF: On the sidelines. But not related to the nuclear issue, just because we were all in the same place.
 
It doesn’t make us not want to get this resolved diplomatically any less than we already do. We clearly believe this is important.
 
QUESTION: Understood, but is this something that now will be – that you will make the – you, meaning the Administration – will make a point of raising, since you say that these charges are –
 
MS HARF: Not as part of the nuclear talks. These are separate issues. We will continue raising his case and the other two Americans who were detained – and Robert Levinson who’s missing – we’ll continue raising them but they are not – their fate and the outcome of these cases should in no way be tied to the nuclear issue.
 
—April 21, 2015 during a State Department press briefing
 
U.S. Senators Marco Rubio (R-FL) and Mark Kirk (R-IL) 
 
“It appears that Mr. Rezaian is being persecuted because of his profession as a reporter and his American citizenship. Freedom of press is a right that should be guaranteed to all individuals regardless of their nationality. We urge the Iranian government to immediately and unconditionally release Mr. Rezaian.  
 
“This case is just the latest example of the true nature of the Iranian regime. The Obama Administration should demand Mr. Rezaian’s immediate release along with all other Americans wrongfully imprisoned in Iran prior to concluding a nuclear deal with this brutal regime.”
—April 20, 2015 in a statement
 
Congressman Dan Kildee (R-MI)
 
“Unfortunately, Iran has a long history of imprisoning Americans on false charges. This includes innocent Americans like my constituent, Amir Hekmati, an American citizen and U.S. Marine who continues to be held as a political prisoner after being arrested on espionage charges. Today’s charges against Jason Rezaian, and similar charges previously imposed on Amir, are unequivocally untrue.
 
“Iran has repeatedly said it wants to rejoin the global community. Yet I simply cannot fathom how this is possible if they continue to hold American political prisoners under false pretenses.”
—April 20, 2015 in a statement 
 

Zarif Announces Peace Plan for Yemen

On April 14, Foreign Minister Mohammad Javad Zarif announced a peace plan to resolve the conflict in Yemen at a press conference in Madrid. His four-point proposal includes an immediate ceasefire, humanitarian assistance, dialogue among Yemeni factions, and establishing a “broad-based” Yemeni government inclusive of all factions. Zarif also reiterated his opposition to the Saudi-led air campaign against the Houthis, claiming that airstrikes “are simply not the answer.” Saudi military spokesperson Ahmed Asiri responded by calling on Iran to stop arming Houthi rebels.

The following are excerpted remarks from Iranian, Saudi, Yemeni, and U.S. officials on Zarif's proposed peace plan.
 
Iran
 
Foreign Minister Mohammad Javad Zarif
 
 
“[Air strikes] are simply not the answer... All operations should end on land and from the air.”
 
“This issue should be resolved by the Yemenis... Iran and Saudi Arabia need to talk but we cannot talk to determine the future of Yemen.”
April 14, 2015, according to the press
 
Saudi Arabia

Ambassador to the United States Adel bin Ahmed al Jubair
 
"Iran has no role to play in Yemen...Iran, last time I checked, does not have a border with Yemen."
April 15, 2015, according to the press
 
Military Spokesperson Brig Gen Ahmed Asiri
 
"The Iranian Foreign Minister knows which door to knock if there is a political proposal."
 
"Iranians have had a role in establishing and arming this militia; however one thing the Iranians can do is to stop their support of this militia, and they will receive the appropriate response to their political proposal."
April 15, 2015, according to the press
 
Yemen
 
Vice President Khaled Bahah
 
"No proposal can be accepted before the war in Aden is stopped."
April 16, 2015, in a press conference
 
"We haven't received any official proposals."
 
"Any initiative must be tied to sound intentions and ending the war machine."
 
United States

State Department Spokesperson Marie Harf
 
"Obviously, Iran plays a role here given their support for the Houthi.  And I think what would be most helpful from the Iranian side at this point is to respect this newly imposed UN arms embargo that was just passed today and stop supporting the Houthi.  So broadly speaking, of course, we need to get back to the political dialogue, that that’s always what we said the way forward is.  So whatever Iran can do to push the Houthi to do that obviously is the direction we need to go in, and want to make sure going forward now that all countries understand what their obligations and responsibilities under this new UNSCR that, again, was just passed today.  So I know those are conversations at the UN that are happening right now.”
April 14, 2015, according to the press
 

 

Congress Acts: White House Reacts to Corker Bill

U.S. administration officials have indicated that President Obama would be willing to sign legislation that would give Congress the ability to approve or disapprove of a nuclear deal. The White House initially threatened to veto the Corker-Menendez bill, arguing that curbing the president’s powers could negatively impact negotiations. But after lawmakers made several changes, including shortening the review period for a final nuclear deal, White House Press Secretary Josh Earnest said that "enough substantial changes have been made that the president would be willing to sign it.”

The “Iran Nuclear Agreement Review Act of 2015,” coauthored by Senators Bob Corker (R-TN), Robert Menendez (D-NJ), Lindsey Graham (R-SC) and Tim Kaine (D-VA) must still be passed in the full Senate and House of Representatives before becoming law. The following are excerpted remarks by U.S. officials.

 

White House Press Secretary Josh Earnest
 
“Despite the things about it that we don’t like, enough substantial changes have been made that the president would be willing to sign it.”
—April 15, 2015, according to the press
 
“If we arrived at a place where the bill that has passed by the Senate Foreign Relations Committee with bipartisan support essentially is a vote to vote later on congressional sanctions and not the decision about whether or not to enter into the agreement, that would certainly resolve some of the concerns we’ve expressed about the authority that is exercised by the President of the United States to conduct foreign policy.
 
The second thing is, as you pointed out, the reports indicate that the link to this terrorism certification measure has been removed.  That certainly would be consistent with the objections that we raised earlier.  Shortening the review period is obviously an important part of this.  We wouldn’t want an unnecessarily -- or at least an unreasonable delay when it comes to implementing the agreement.
 
The other thing that we would want members of the committee in bipartisan fashion to confirm is that this piece of legislation would be the one and only mechanism for codifying precisely what the appropriate congressional oversight is into this matter, and to be specific about the way that Congress would vote on the sanctions that Congress put into place.
 
And that bipartisan agreement is critical to making sure, frankly, that there isn’t an untoward effort to insert a different provision into some sort of must-pass piece of legislation that could really gum up the works here.  So getting bipartisan agreement on that is important.
 
And then, finally, if we could clarify Congress’s role by taking all of these steps -- shortening the review period, being clear about what it is that they're voting on, making clear that this is a vote to vote later on congressional sanctions -- that that would actually achieve, at least in part, what the President has established as the priority here, which is to ensure that our negotiators have the time and space that's necessary to reach an agreement -- if one can be reached -- by the end of June.  And if presented with a compromise along the lines that I just laid out here, that would be the kind of compromise the President would be willing to sign.
—April 14, 2015, in a press briefing
 
Secretary of State John Kerry
 
“Yesterday there was a compromise reached in Washington regarding congressional input. We are confident about our ability for the president to negotiate an agreement and to do so with the ability to make the world safer.”
—April 15, 2015, according to the press

 

Congress Acts: Iran Reacts to Corker Bill

Iranian officials have dismissed the U.S. Senate Foreign Relation Committee’s approval of a bill that would give Congress the ability to approve or disapprove of a nuclear deal. “What the U.S. Senate, Congress and others say is not our problem,” President Hassan Rouhani said on April 15. In a televised speech, he also warned that without an “end to sanctions, there will not be an agreement” with the world’s six major powers.

The “Iran Nuclear Agreement Review Act of 2015,” coauthored by Senators Bob Corker (R-TN), Robert Menendez (D-NJ), Lindsey Graham (R-SC) and Tim Kaine (D-VA) must still be passed in the full Senate and House of Representatives before becoming law. The following are excerpted remarks by Iranian officials.
 
President Hassan Rouhani
 
“What the U.S. Senate, Congress and others say is not our problem. We want mutual respect ... We are in talks with the major powers and not with the Congress.”
 
“If there is no end to sanctions, there will not be an agreement. The end of these negotiations and a signed deal must include a declaration of cancelling the oppressive sanctions on the great nation of Iran.”
 

—April 15, 2015 in a televised speech
 
Foreign Ministry Spokesperson Marziyeh Afkham
 
“That [legislation] is an issue related to their domestic affairs. We are dealing with the American government.”
—April 15, 2015 in a press conference

 

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