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Domestic Economy
Sun, Dec 07, 2008

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US Heading Toward Depression
$34b Foreign Investment in 16 Years
Int’l Trade at $140b
Construction of 95 Dams Prioritized
Russia Backing Persian Pipeline
TRACECA Confab Wraps Up
Africa Keen on Petrochem Projects
Agro Research Upbeat
$7b Allocated for Private Sector
Energy Role Highlighted
Shipping Company With Pakistan Sought

US Heading Toward Depression
US unemployment increased to 6.7 percent in November, but factoring in discouraged workers would take it closer to 8.7 percent.
The US Labor Department reported that the economy lost 533,000 jobs in November, after losing 320,000 jobs in October and 403,000 jobs in September. This was much worse than expected and represents wholesale capitulation.
The threat of a widespread depression in the US is now real and present.
The US economy has shed 1.9 million jobs since December, as the full weight of the banking crisis, trade deficit with China and burdens imposed by high-priced imported oil are bearing down on manufacturing, construction and the broader economy with unrelenting pressure.
Unemployment increased to 6.7 percent in November, but factoring in discouraged workers would take it closer to 8.7 percent. Add workers in part-time positions that cannot find full-time employment and the hidden unemployment rate is nearly 13 percent, reported.

Recession or Depression?
The US economy has been slowing since December 2007, but the real question is whether it’s in a recession or depression?
Recessions are like stock market corrections; after a time, equity prices rebound without government intervention. Federal Reserve interest rate cuts and stimulus tax rebates and spending have shortened the lives and eased the impact of post-World War II recessions, but those policies did not end them. The economy self corrected.
A depression is not self-correcting. The Roosevelt administration’s stimulus packages--huge deficit spending--eased the pain but failed to end the Great Depression. Its policies did not put the US economy on a sustainable growth path, because structural problems worsened and pulled the economy down. The current economic slowdown has two structural causes: bad management practices at the large banks and the huge foreign trade deficit.
To accomplish lasting prosperity, President-elect Obama will have to fix the banks and the trade deficit. Obama must ensure that the banks use the trillions of dollars in federal bailout assistance to renegotiate mortgages and make new loans to worthy homebuyers and businesses.
Obama must ensure that banks do not continue to squander federal largesse by padding executive bonuses, acquiring other banks and pursuing new high-return, high-risk lines of businesses in merger activity, carbon trading and complex derivatives.
Industry leaders like Citigroup have announced plans to move in those directions. Many of these bankers enjoyed influence in and contributed generously to the Obama campaign. Now it remains to be seen if Obama can stand up to these same bankers and persuade or compel them to act responsibly.
In addition, Obama must address the huge cost of imported oil and trade deficit with China.
Any effort to resurrect the economy is doomed to create massive foreign borrowing, another round of excessive consumer borrowing and a second banking crisis that the Treasury and Federal Reserve will not be able to reverse.
Ultimately, reducing the oil import bill will require higher mileage standards for automobiles and assistance to automakers to accelerate the shift toward alternative fuels and high-mileage vehicles.
Fixing trade with China will require a tax on dollar-yuan transactions if China continues to refuse to stop subsidizing dollar purchases of yuan to prop up its exports and shift Chinese unemployment to the US manufacturing sector.

Resuscitating Growth
A stimulus package focused on infrastructure is critical for resuscitating growth, as tax rebate checks ended up in savings accounts or were spent at the Wal-Mart on Chinese goods, and did little to create jobs or accelerate growth.
The priority should be projects to repair roads, rehabilitate schools and refurbish public buildings, which would create high-paying jobs at home and provide a legacy in capital improvements that assist growth now and in the future.
However, stimulus spending, alone, won’t fix what’s broke. It didn’t end the Great Depression.
Japan has had a succession of stimulus spending over the last two decades, which failed to restore its economic dynamism. President-elect Obama’s massive stimulus package is also no different. He must also reach into the management of banks and dramatically reduce US dependence on imported oil and the trade deficit with China. The alternative is economic stagnation or worse, a depression.

$34b Foreign Investment in 16 Years
Iran has attracted foreign investment to the tune of $34.6 billion for 485 projects in the past 16 years.
Foreign investment made by nations from five continents surpassed $652 million during March-October, Fars News Agency said in a report.
Firms from over 50 countries have invested in Iran, with Asia and Europe grabbing the biggest shares.
Asian firms have invested over $11.6 billion in 190 Iranian projects, with those from UAE leading the pack, followed by Singapore, Indonesia and Oman.
Over 20 European countries, particularly Germany, the Netherlands and Spain, made investments worth over $10.9 billion in 253 projects.
The UK, Turkey, Italy and France also have had a great share in Iranian investments.
Companies from Canada, Panama, USA and Jamaica are also involved in seven economic projects in Iran, valued over $1.4 billion.
This is while entrepreneurs from Mauritius, Liberia and South Africa have totally invested close to $8 billion in Iran.
In addition, Australia has invested $682 million in an Iranian project.

Int’l Trade at $140b
Commerce Minister Massoud Mirkazemi has put Iran’s international economic collaboration at $140 billion for last year.
“Imports constituted $48.5 billion of the whole figure,“ he added.
The minister said that the implementation of Economic Overhaul Plan would help establish justice and distribute wealth across the country, Fars News Agncy reported.
Mirkazemi termed the plan as a move toward non-oil economy.
“The government wants to distribute subsidies fairly among the various strata,“ he said.
Earlier, President Mahmoud Ahmadinejad said the government should implement the Economic Overhaul Plan to administer justice across the country.
The president made the remark in a meeting with members of the plan’s working group.
The scheme drawn up by his Cabinet aims to tackle the country’s economic problems, including rising inflation, and protect the low-income strata. The plan will incorporate fundamental changes in the banking, customs and taxation sectors.
Stressing that justice is the main goal of the program, the president said development without justice is worthless, Presstv reported.
Ahmadinejad noted that the rich benefit from some 70 percent of subsidies and that this is one of the primary reasons for changing the subsidies system.

Construction of 95 Dams Prioritized
The government has prioritized the construction of 95 dams this year in order to tap the country’s water reserves, said First Vice President Parviz Davoudi.
Speaking at the inaugural ceremony of Khoda-Afarin Dam in Kalibar, East Azarbaijan province, Davoudi said that if the government were to mobilize the required funds, various parts of the country will witness a huge development, IRNA reported.
Davoudi explained that Khoda-Afarin Dam has been jointly built with Azerbaijan.
“This is a friendship dam that can strengthen mutual ties between the two countries,“ he said.
Water distribution is very important as access to water is directly linked to social welfare, productivity and healthy living conditions. Hence, proper management of water resources is of importance.
This issue is of prime importance in areas where water shortage is more evident, particularly in Africa and the Middle East.
Problems related to water shortage crop up each year and water rationing is now a serious option in Iran.
Investment in the water sector has increased significantly in some countries and a major portion of state budgets is channeled to this sector.

Russia Backing Persian Pipeline
An Iranian lawmaker said Moscow is not against Tehran’s plan to construct the Persian Pipeline to export natural gas to the European continent.
“Iran has obtained Russia’s agreement to construct the Persian Pipeline,“ Hossein Zoulanvar, a member of Majlis Energy Commission said.
“Iran has abandoned the Nabucco pipeline,“ Deputy Petroleum Minister Akbar Torkan told Fars News Agency, adding that Tehran intends to construct the Persian Pipeline instead to transport its gas to Europe.
Iran will pay for construction of the pipeline and Turkey will ensure its security.
Gas Export
Nabucco is a planned gas pipeline project with a length of 3,300 km. The pipeline will transport gas from Iran, Iraq, Azerbaijan, Turkmenistan and Kazakhstan to Europe.
Nabucco is a project envisaging transport of natural gas through Turkey, Bulgaria, Romania, Hungary and Austria. The projected capacity of the pipeline linking the Caspian Sea fields with Europe is 31 billion cu m per year. Construction of the Nabucco will take $5.8 billion.
According to Torkan, the Persian Pipeline will transport Iranian gas to Europe through Turkey.
Creation of a gas OPEC and Russia’s membership in the organization indicate that Moscow supports Tehran’s energy policies.
Coming to Iran’s refusal to join Nabucco pipeline, Zoulanvar said that several EU countries had imposed sanctions on the Iranian gas sector following US pressures. “That’s why Iranian officials have decided to construct the Persian Pipeline,“ he added.
“Iran will pay for construction of the pipeline. If any country wishes to put investment in the pipeline, the Islamic Republic will welcome it. Turkey will ensure security to the Persian Pipeline,“ Zoulanvar said.
“Ankara has pledged to create conditions to transport gas to Europe through the Persian Pipeline via Turkey,“ he said.
The length of the pipeline will total 3,300 km (the distance from Iran to Europe). The total cost of the project will be $6 billion.

Feasible Routes
The Information Office of US Energy Department, in a recent report said Iran’s annual gas export of 300 billion cubic meters to Europe will begin in 2009. Referring to the $300 million contract to construct gas pipeline to Greece via Turkey, the report added, “Iran’s gas export to Europe is also feasible via Bulgaria and Romania.“
The report stipulated that sub-sea gas transfer from Iran to Italy is also possible, but the high cost of such construction would make other options more attractive. According to the same report, a trilateral memorandum of understanding (MoU) was signed with Bulgaria and Romania in 2003, and in January 2004, another MoU was inked by Iran and Austria.
The IranÐArmenia Gas Pipeline is a 140 km pipeline from Iran to Armenia. The 100 km Iranian section runs from Tabriz to the IranÐArmenia border. The Armenian section runs from the Meghri region to Sardarian, and another 197 km of pipeline is planned to reach the center of the country, where it will link up with the existing distribution network.
The initial capacity of pipeline is 1.1 bcm of natural gas annually, which will be increased up to 2.3 bcm by 2019. The contract was signed for 20 years. For each cubic meter of the Iranian gas, Armenia is supposed to return 3 kwh of electric energy to Iran. The pipeline started operation on 20 December 2006, and was officially inaugurated by the Presidents Mahmoud Ahmadinejad of Iran and Robert Kocharyan of Armenia on 19 March 2007. There are discussions to build a second pipeline from Iran to Armenia.

According to the Oil Ministry, Iran holds about 1,000û1012 cu ft (28,000 km3) of proven natural gas reserves of which 33 percent are as associated gas and 67 percent is in non associated gas fields. It stands for world’s second largest reserves after Russia.
As it takes approximately 5,850 cubic feet (166 m3) of gas to equal the energy content of 1-barrel (0.16 m3) of oil, Iran’s gas reserves represent the equivalent of about 170 billion barrels of oil.
At present, Iran is producing only a small share of its gas reserves, about 5.5 trillion cubic feet per year. This means that Iran is one of the few countries capable of supplying much larger amounts of natural gas in the future.
Iran still has huge potential for new significant gas discoveries: areas like Caspian Sea, North East, Central Kavir and especially areas starting from Aghar and Dalan gas fields in Fars province up to the Strait of Hormuz and Central Persian Gulf have considerable amounts of undiscovered gas resources.
The American energy institutes estimate that Iran’s undiscovered gas resources could be from 200û1012 cu ft to 800û1012 cu ft. According to the Exploration Directorate of NIOC, there are about 150 unexplored anticlines in Iran.

TRACECA Confab Wraps Up
Iran took part in the 10th Ministerial Conference of the TRACECA Intergovernmental Commission in Baku on Thursday.
According to IRNA, the one-day conference brought together TRACECA (Transport Corridor Europe-Caucasus-Asia) transport officials and ministers from Iran, Afghanistan, Russia, South Korea, China, Turkmenistan, Egypt, Poland, Baltic states as well as representatives from GUAM, United Nations Economic Commission for Europe, Organization for Security and Cooperation in Europe, Black Sea Economic Cooperation, Organization of Islamic Conference, European Union, World Bank, Asian Development Bank, and European Bank for Reconstruction and Development.
In this respect, the deputy minister of roads and transportation said revival of ancient Silk Road is among Iran’s major economic objectives, aimed at boosting regional economic ties.
Seyyed Mahdi Hashemi, who was speaking to IRNA on the sidelines of the event, expressed hope that expansion of ties with regional countries could help strengthen their economies.
He added, “Iran is presently pursuing the Qazvin-Rasht-Anzali Railroad Project in a bid to link regional trade routes. Through Iran’s transportation facilities and links, the regional states can gain access to the farthest parts of the world.“
TRACECA is an international organization of economic cooperation. Participants in the conference discussed work done during the period of existence of the program, the process of implementation of the action plan until 2015, as well as the promising infrastructure projects in the Black and Caspian Sea Basins.
The Permanent Secretariat is based in Baku, Azerbaijan, established in 1998 upon the signing of a Multilateral Agreement on International Transport for the Development of Transport Corridor Europe-Caucasus-Asia.

Africa Keen on Petrochem Projects
Managing Director of National Iranian Petrochemical Company (NIPC) Adel Nejad-Salim referred to the presence of African investors in Arya Sasol Company and said that given the favorable results of investment venture, African investors have expressed their willingness to participate in other petrochemical projects.
While addressing the inaugural ceremony for export of polymer products of Arya Sasol Company from container jetty No. 7 of Pars petrochemical port, he said, “Export of petrochemical products from Assalouyeh was something like a dream which has today been fulfilled in the wake of painstaking efforts of many experts.“ According to, Nejad-Salim, who is deputy oil minister in petrochemical affairs, recalled that at present 7 jetties from the 15 jetties of Pars petrochemical port have come on stream in light of the endeavors of experts.
Meanwhile, Managing Director of Arya Sasol Petrochemical Complex Abbas She’ri-Moqaddam said that the complex is the largest olefin unit with gas feed in the world. “The polymer products of this complex amounting to 4,000 tons will be exported in 160 containers for the first time in the country.“
He recalled that Arya Sasol Company marked the first 50-50 foreign participation after the victory of Islamic Revolution and expressed hope that such projects would also continue in the future.

Agro Research Upbeat
Close to 5,000 experts are conducting research works on a wide range of subjects in 24 research institutes nationwide, Minister of Agricultural Jihad Mohammadreza Eskandari told ISNA.
Visiting a biotechnology research center in Tabriz, East Azarbaijan province, he said that recently there has been a significant growth in the number of research projects.
According to the minister, the number of agricultural research projects has increased by 50 percent. In addition, all agricultural and horticultural products will be labeled in the near future. These products have been produced by biological materials and without using pesticides.
“The ministry aims to reduce the use of pesticides in farming. The use of pesticide has decreased by 50 percent in last crop year and the practice will continue this year,“ he noted.
The minister put the production of agricultural products at 108 million tons this year, which indicates a 20 million ton increase in last year.

$7b Allocated for Private Sector
An official of the Ministry of Industries and Mines stated in Tabriz on Friday that $7 billion has been drawn out of the Oil Stabilization Fund to support the private sector.
Deputy Minister of Industries and Mines for Human Resources and Logistics Hassan Sheikhnia told Mehr News Agency that the sum has been earmarked for 800 private industrial units to secure their required working capital.
The official added that industrial and mineral exports in the first half of this year reached 16.8 million tons, up 6.3 and 39 percent in terms of weight and value respectively over the figures in the same period last year.

Energy Role Highlighted
Secretary General of International Energy Forum Neo van Hulst on Friday said that Iran, as one of the biggest countries with oil and gas reserves, can play a crucial role in the energy sector at regional and global levels.
Hulst, who was visiting Pars Special Economic and Energy Zone, told that creating a link between oil producing and oil consuming countries can stabilize the oil market.
“In light of this link, producing and consuming countries can exchange information with each other to create more transparency in the oil market,“ he noted.
Hulst emphasized that continuation of negotiations and the link between producing and consuming countries can be effective if investments are to be made in the producing countries.
He also opined that oil producing countries can help restrict the use of this fossil fuel through curbing domestic consumption and preventing emission of greenhouse gases.
“Reduction of domestic consumption in oil producing countries can lead to the situation wherein more fuel would be available to oil consuming countries and demand for oil would be regulated,“ he told
Elsewhere in his remarks, Hulst said that the oil market is quite complicated. “At the beginning of 2008, the price of oil went up more than what we thought and currently it has reached very low levels after fluctuations in the market.“
He recalled that he visited South Pars upon his own request and his tour of Assalouyeh was aimed at observing the latest developments in the gas and petrochemicals industries of the region.
“I was really impressed with the huge installations that I saw in South Pars,“ he said.
Asked whether his impression of Iran has changed upon visiting the installations of South Pars or not, he noted, “What people hear and read are very different from what they see. In my visit, I was witness to significant developments in Iran’s gas and petrochemicals industries.“

Shipping Company With Pakistan Sought
Iran’s Ambassador to Islamabad Mashallah Shakeri said Tehran is willing to establish a joint shipping company in Pakistan.
The official raised the issue in a meeting with Pakistan’s Federal Minister for Industries and Production Mian Manzoor Ahmed Wattoo on Thursday, where they discussed promotion of trade ties, Fars News Agency reported.
Shakeri said that the Iranian business community was interested in joint ventures with their Pakistani counterparts on various fields including cement, steel, energy, food and agro-based industries.
He said exchanges of views between the business communities were essential and that Pakistani traders have been invited to visit Iran to continue talks in this respect.
He said Iranian business delegations were also ready to visit Pakistan to promote trade and business activities.
Mian Manzoor Ahmed Wattoo, for his part, described Iran and Pakistan as friendly neighbors and assured that bilateral relations would get stronger.
He called Pakistan an investment hub and added that there are various opportunities for foreign investors in the industrial sector, particularly in cement, energy, steel and engineering fields.
According to him, joint efforts will be beneficial to both countries in cement and steel manufacturing fields due to the easy access to raw materials and expertise.
The Pakistani minister said his government has planned to expand the cement and steel industries, and suggested that Iran utilize the trans shipment facilities from Gwadar port to handle big- and medium-sized ships.
Meanwhile, Tehran and Islamabad will resume talks to resolve longstanding issues regarding the Iran-Pakistan-India (IPI) gas pipeline this month.
“A delegation, led by Dr. Asim, Advisor to Pakistani Prime Minister for Petroleum and Natural Resources, will visit Tehran after Eid-ul-Azha for taking up the matter with Iran,“ sources told The Frontier Post.
In this regard a meeting of IPI Steering Committee, chaired by Dr. Asim, was also held in the Ministry of Petroleum and Natural Resources which was also participated by Chief Minister of Balochistan Aslam Raeesani and representatives of foreign affairs, FBR, finance and other departments.
Iran and Pakistan initiated a Gas Sales Purchase Agreement earlier this year. Indian and Pakistani officials also announced earlier this year that they had resolved almost all bilateral issues including transit fee which saw New Delhi boycotting IPI pipeline talks for about a year.
India has agreed to give Pakistan a transit fee of $200 million per year, which is equivalent to $0.60 per million British thermal unit for allowing passage of the pipeline through that country.

Construction Subsidies
Close to 60 billion rials have been allocated in subsidies for the
construction of 800,000 residential units in rural areas.

Retail Chain Stores
Commerce Minister Massoud Kazemi said 3,000 billion rials have been earmarked to set up small retail chain stores nationwide.

C. America States Agree on Common Currency
A summit of Central American leaders agreed to adopt a common regional currency and passport, among other measures to bolster regional integration in the face of global financial uncertainty, they said in a statement.
The eight leaders vowed to promote “a regional conscience that instills people with a sense of identity and belonging to a united Central American region“, including “perfecting the issue of a Central American passport and the adoption of a single Central American currency.“
They also resolved to “standardize laws“ in the immigration, education and security sectors “that will give greater cohesion to Central American integration and that ensure citizens the benefits of that integration.“
A report on progress made on all those issues will be presented at the next Central American summit, AFP wrote.
The presidents of Honduras, Guatemala, El Salvador and Nicaragua, and representatives from Costa Rica, Panama, Dominican Republic and Belize, also agreed on Friday on a 41-point economic blueprint to help the region weather the current global financial storm.

Kuwait May Scrap Refinery Project
Kuwait may scrap a project to build the country’s fourth refinery with a capacity of 615,000 barrels per day, which has faced opposition in parliament, it was reported.
The government plans to cancel the fourth refinery project and replace it with another which includes a revamping of the Shuaiba and (Mina) Al Ahmadi refineries, the daily Al Seyassah quoted an unnamed official as saying.
The source said the decision may be taken especially after the audit bureau confirmed that the new refinery project was not feasible from the economic and technical points of view, the newspaper said.
Kuwait has awarded contracts worth $8.4 billion on the project, including a package worth $4 billion to Japan’s JGC Corporation and South Korea’s GS Engineering and Construction Corporation.
But final contracts to build the Al Zour refinery, valued at about $15bn, have yet to be signed as the state audit bureau has launched a probe into whether the tender process showed irregularities.

German Economy to Shrink
Germany’s central bank predicted on Friday that the country’s economy will shrink 0.8 percent next year as the global financial crisis takes its toll, just as parliament gave its final approval to an economic stimulus package that has been criticized as too timid.
The Bundesbank said in a twice-yearly report that the “prospects for the German economy have worsened notably since the beginning of the autumn“, AP reported.
The German economy--Europe’s biggest--slipped into recession in the third quarter as exports weakened. Still, the slowdown has yet to translate into higher unemployment and lower consumer confidence.
The central bank said that, assuming the situation on financial markets calms and the global economy picks up, the German economy is likely to grow by 1.2 percent in 2010.

Indonesia Secures Emergency Loan
Indonesia has secured emergency loans worth $5 billion to help plug its budget deficit and boost growth, authorities have said.
“The loans, which come from the World Bank, the Asian Development Bank, Japan, Australia and France, can be drawn upon whenever Indonesia needs them,“ finance ministry official Rahmat Waluyanto told AFP on Saturday.
“Donors still perceive Indonesia as an important and strategic country. We should keep the momentum of our economic development going,“ he said, adding that raising money through government bonds would prove expensive due to high interest rates.
Waluyanto said that Indonesia would only use the standby loans if economic growth slowed to 5.8 percent in the first quarter of 2009.
The Indonesian economy grew by 6.1 percent in the third quarter of this year.

Serbia, Russia to Finalize
Energy Deal
Serbia and Russia expect to finalize a major energy deal by the end of this year, the head of Russian gas giant Gazprom, Alexei Miller, said.
The deal involves the construction in Serbia of part of the South Stream gas pipeline and the Banatski Dvor underground gas storage facility, as well as the purchase of a majority stake in Serbian oil monopoly NIS, Reuters wrote.
“As far as South Stream and Banatski Dvor are concerned, we are 100 percent ready to sign“ a final agreement, Miller told a press conference in Serbia’s capital Belgrade.