Iran Receives 80 Percent Of Oil Proceeds In Cash, Officials Insist

Citing a report by the mayor, Habib Kashani said on Sunday that Tehran municipality currently faces a deficit of 60 trillion rials or about $200 million only for the first two months of the Iranian year, which started on March 21. 

He predicted that the municipality will be forced to sell other properties, including Shahr-e Aftab (Sun City) Fairground complex -- covering an area of 120,000 square meters – and Hamshahri media institute that publishes one of the biggest national Persian-language dailies as well as dozens of other publications.

Kashani warned that it will be impossible to implement the plans and projects of the municipality if no income is earned in this critical period of time. 

Nasser Amani, another member of the City Council, criticized the mayor’s performance, saying that Alireza Zakani's report did not provide any details about what he had done to overcome the dire financial situation.

Since his controversial selection as the mayor of Tehran, the hardliner politician has frequently been criticized by the media and opponents for his poor performance, disorderly hirings, and nepotism. He is particularly accused of appointing individuals from his circle of friends and family such as the appointment of his son-in-law as his adviser.

In an article arguing that Iran can earn as much by circumventing United States’ sanctions as it would if it signed a nuclear agreement to lift those sanctions, the website compares annual oil income during the former president Hassan Rouhani’s two terms, with current president Ebrahim Raisi’s 11-month-old administration.

It argues that during Rouhani (2013-2021) when the Joint Comprehensive Plan of Action (JCPOA) was signed with world powers in 2015, the average annual oil export income was $37.5 billion, but it had significantly dropped since 2018 when President Donald Trump exited the agreement and imposed oil sanctions.

However, exports picked up in 2021, the website says, trying to give the credit to the Raisi administration of hardliners.

Exports had already begun to increase around the time of the 2020 US presidential elections and climbed further when the Biden administration decided to launch talks to revive the JCPOA and failed to rigorously enforce the Trump-era sanctions.

The article tries to argue that not reaching an agreement with the US will make no difference in oil exports and Iran can boost its revenues to $50 billion. But it conveniently fails to mention that most of the recent gains claimed are due to higher oil prices, not the volume of exports.

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Without sanctions, Iran’s oil revenues would at least double, as it would export at least two million barrels per day instead of the current estimated shipments of under one million. The country would also not be forced to offer $20-30 discount per barrel and spend more money to market the sanctioned oil. It is well known that various middlemen and brokers make large profits acting to disguise Iran’s shipments.

It is beyond doubt thatIran’s oil shipments and profits have increased since November 2020, as Fars also shows in its report, but the amount of revenues can be anyone’s guess. The discount Iran offers and profits it has to share with middlemen remain secret. Moreover, some observers believe China is not paying for all the crude it receives in cash and some is repaid in kind, with shipments of other goods.

Indirect evidence for this is the deteriorating financial situation of the Raisi administration, as the practice of paying salaries late continues amid a 50-percent inflation rate and the national currency has fallen to a historic low.

Raisi was forced to eliminate an annual food import subsidy of $15 in early May, which led to a huge jump in prices, leading to protests and political instability.

Iran has been shipping most of the illicit crude to China, offering large discounts especially since Russia came under sanctions after its February invasion of Ukraine and began shipping its unsold oil also to China. Reports in early June indicated that Iran’s exports to China halved in May because of Russian competition.

The last round of talks to resolve differences with Washington and finalize the revival of the JCPOA failed this week in Doha. The US accused Iran of introducing “extraneous” issues in the talks and remaining undecided on core issues.

A nuclear agreement would not only boost income form oil and other exports, it would also gradually allow Iran to attract some investments, especially to revitalize its oil and natural gas industry, worn out during long years of sanctions.

According to videos published on social media, retirees took to the streets in several cities such as Kerman, Karaj, Zanjan, Arak, Shush, Shushtar, and Ahvaz to protest against the Raisi administration for pushing in parliament a much smaller increase of only 10 percent while the latest inflation rate figure stands at 55 percent.

They say the administration’s decision to increase pensions by 10 percent is "illegal" and "unfair".

Denouncing President Ebrahim Raisi and his government, the pensioners chanted slogans such as "Parliament, government; both lie to the nation."

Retirees are demanding pension increases in par with rising prices of essential foods, saying that the current payments are not in line with decrees by the Supreme Labor Council, which had stipulated a 38-percent increase in the minimum wage.

With food prices rising faster after four years of United States’ ‘maximum pressure’ sanctions, Iranian workers and retirees have been holding regular protests or strikes to demand higher salaries. Last month, Iran’s currency fell to a historic low of 333,000 rials to the US dollar in June.

During the past weeks, widespread protests by workers,shop owners, and teachers protesting against poverty, inflation, and low wages, have been met with heavy-handed crackdown and numerous arrests by the security forces.

In an article by economy writer Maryam Shokrani on Saturday [July 2], Shargh reported that China has already opened a letter of credit for the project and will complete the payment of the 15-billion-yuan loan until 2024.

The loan is scheduled to be repaid until 2029 and the interest charged will boost Iran’s debt to almost 22 billion yuan, or $3.2 billion.

The reformist paper, which is relatively independent from the government, although under the rules of censorship in Iran says that the project has little economic justification, as passenger rail service in the country is a money loser. Instead, vital economic railway projects in the north and in the south-east have been languishing for years.

As an example, the report mentions a planned railway connection between the Arabian Sea port of Chabahar and the city of Zahedan Sistan-Baluchistan province. Iran has been hoping that the port will boost transit of goods not only for its local market but also to other countries. India made investments in the development of Chabahar with the hope of avoiding Pakistan in shipping goods to Iran, Afghanistan and other countries to the north.

Shargh argues that as has been the case in many other less-developed countries, China is in the business of financing similar projects and if repayment in cash proves difficult, it takes oil and minerals instead.

Iran’s foreign and international trade policies have tilted toward China in the last decade, following a policy of ‘looking East’ espoused by the country’s ruler, Supreme Leader Ali Khamenei. Tehran inked a 25-year strategic cooperation agreement with Beijing last year, which has proven controversial among some Iranians.

The issue is that Tehran has been quite consistent in following an anti-West and an anti-Israel foreign policy in the Middle East, supporting a variety of militant organizations, developing ballistic missiles and pursuing a nuclear program. This first brought about international sanctions from 2007-2015 and then United States crippling sanctions in 2018.

The restrictive measures have considerably weakened its economy and mostly eliminated infrastructure development projects.

A former Iranian railway official, Mahmoud Heshmati told Shargh that the Qom-Esfahan fast train project has no economic justification. Turkey and Saudi Arabia have launched limited speed trains, but they are countries that serve millions of foreign visitors, while international tourism in Iran is negligible.

Iran, which before the establishment of the Islamic Republic was a popular destination for Westerners in the 1960s and 70s, now has only small groups of international visitors. There are two major reasons. One is strict Islamic rules such as hijab for women, and a ban on alcoholic drinks and the other is years of arbitrary arrests of foreign visitors for purposes of exchanging prisoners with Europe, the United States, and even Australia.

Another former official told Shargh that the Qom-Esfahan project has a 16-year history, but successive government hesitated because of a host of technical challenges. There was no need to take a loan from China, which would be hard to repay with its high interest.

The former official argued that private Iranian capital played a major role in economic development in the United Arab Emirates and other regional countries, while it stays away from Iran. “The reason is that domestic investors are pressured in Iran,” he said. But for the Chinese, it is just the opposite.

A magnitude 6.1 earthquake hit Iran’s Hormozgan province, with the area hit soon after by two strong quakes of up to 6.3 magnitude.

Some 24 tremors, two with a magnitude of 6.3 and 6.1, followed the 2 a.m. local time quake that flattened the village of Sayeh Khosh near Iran's Persian Gulf coast. The most recent tremor occurred around 8 a.m., officials told state TV.

"All of the victims died in the first earthquake and no-one was harmed in the next two severe quakes as people were already outside their homes," said Foad Moradzadeh, governor of Bandar Lengeh country, quoted by the state news agency IRNA.

Emergency services spokesperson Mojtaba Khaledi told state TV that half of the 49 people injured had been discharged from hospitals.

Saeid Pourzadeh of the Kish island crisis task force said shipping and flights in that part of the Persian Gulf had not been affected by the quakes.

State TV said 150 quakes and tremors had struck western Hormozgan over the past month.

Major geological fault lines crisscross Iran, which has suffered several devastating earthquakes in recent years. In 2003, a magnitude 6.6 quake in Kerman province killed 31,000 people and flattened the ancient city of Bam.