Iran woos local investors as US sanctions loom, currency falls

Iranians walk inside Tehran’s ancient Grand Bazaar in Tehran on July 28, 2018. (AFP)
Updated 28 July 2018
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Iran woos local investors as US sanctions loom, currency falls

  • The probable return of sanctions has triggered a rapid fall of Iran’s currency
  • The new Iranian plan appears to be aimed at easing concern over the US decision

DUBAI: Iran plans to offer price and tax incentives to private investors to take over idle state projects and help boost the economy, state media reported on Saturday, as the country faces likely US sanctions and the exit of many foreign companies.
In May the United States pulled out of a multinational deal to lift sanctions against Iran in return for curbs on its nuclear program, and Washington has told countries they must halt all imports of Iranian oil from Nov. 4 or face US financial measures.
The new Iranian plan, along with action against alleged financial crime, appears to be aimed at easing concern over the US decision.
The probable return of sanctions has triggered a rapid fall of Iran’s currency, protests by bazaar traders usually loyal to the Islamist rulers, and a public outcry over alleged profiteering.
The plan will offer attractive prices and flexible terms as well as tax holidays for investors who agree to take over some of the 76,000 government projects which are unfinished or idle, Vice President Eshaq Jahangiri said on state television.
“Over the past few months, the country’s liquidity has gone into housing, foreign exchange and gold coins, raising prices and provoking public concerns,” Jahangiri was quoted as saying by the website of the state broadcaster.
“A main issue in the meeting ... was to find solutions to push liquidity toward employment and activating manufacturing,” Jahangiri added after the meeting attended by President Hassan Rouhani, and the heads of parliament and the judiciary.

PULLING OUT
The sanctions start to come into effect in August but some European companies investing in Iran and with big US operations have already announced they will pull out of business deals with Tehran.
The Iranian rial plunged to a record low against the US dollar on the unofficial market on Saturday. The dollar was offered for as much as 97,500 rials, compared to about 85,500 a week ago, according to foreign exchange website Bonbast.com.
The currency has lost more than half of its value this year because of a weak economy, financial difficulties at local banks and heavy demand for dollars among Iranians who fear the effects of sanctions.
Judiciary spokesman Gholamhossein Mohseni Ejei said on Saturday that 18 people had been arrested over alleged profiteering from foreign exchange dealings and the illegal importing of luxury cars, state television reported.
In late December, demonstrations which began over economic hardship spread to more than 80 Iranian cities and towns. At least 25 people died in the unrest, the biggest expression of public discontent in almost a decade.
Demonstrators initially vented their anger over high prices and alleged corruption, but the protests took on a rare political dimension, with a growing number of people calling on Supreme Leader Ayatollah Ali Khamenei to step down.


Stronger US dollar unlikely to derail bullish view on commodities — Goldman Sachs

Updated 21 September 2018
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Stronger US dollar unlikely to derail bullish view on commodities — Goldman Sachs

  • The dollar has been lifted by a stronger-than-expected US economy, the world’s largest
  • A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies

BENGALURU: Goldman Sachs said a stronger dollar is unlikely to derail its bullish view on commodities, which are likely to find support from physical shortages.
The dollar has been lifted by a stronger-than-expected US economy, the world’s largest, and that’s a positive sign for global growth, the US investment bank said.
The US dollar index has lost more than 1 percent this week, but this follows months of strong demand over US-China trade-related tensions, as investors bet the greenback would gain at the expense of riskier currencies.
“The risk aversion this summer created significant emerging market destocking, particularly in China, as consumers attempted to avoid a strong dollar and tariffs by liquidating inventories,” Goldman said in a note dated on Thursday.
A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies, making buyers and users more likely to draw on any stored materials in preference to imports.
“This liquidation, however, has a physical limit with Chinese destocking having already created significant increases in physical (premiums) for oil and metals – a sign of physical shortages.”
Going forward, oil had a strong fundamental outlook helped by US demand growth, supply losses and disruptions, and still constrained US shale output, Goldman said.
The bank said its near-term Brent crude oil price target remained at $80 a barrel.
The bank said it was moderating its bullish view for gold due to a sell-off in emerging markets, and it lowered its 12-month price forecast for the metal to $1,325 per ounce, down from $1,450 an ounce earlier.