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Domestic Economy
Thu, Oct 09, 2008

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Ensuring Armenia’s
Energy Security
98% of Agro Output by Private Sector
Concern Over Falling Oil Prices
Call for Promoting Insurance
Reviving Ancient Trade Route
Iran Crucial for Global Oil Supply
Restrictions for Car Imports
Vast Economic Potential Lauded
Sagem to Expand Trade
Broader Customs Ties With Poland
OVL in Oil Talks

Ensuring Armenia’s
Energy Security
A National Iranian Gas Export Company (NIGEC) official has announced the country’s immediate plans to begin gas exports to Armenia.
“Iran plans to annually export some 1.1 billion cubic meters of gas to Armenia and the amount will eventually be increased to 2.3 billion cubic meters by 2019,“ NIGEC’s director for engineering affairs, Rasoul Salmani, said.
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Earlier, Reza Kasaei-Zadeh, the head of National Iranian Gas Export Company, said the country would be able to provide Armenia with the gas it needs for the coming winter.
“Iran will pump three million cubic meters of gas to Armenia this winter,“ said Kasaei-Zadeh in an interview with ISNA.
Armenia’s Energy Minister Armen Movsisyan has said that the annual capacity of the Iran-Armenia gas pipeline would increase to 2.5 billion cubic meters.
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“The Iranian-Armenian pipeline would guarantee Armenia’s energy security by increasing the capacity of the pipeline’s Kadzharan-Yerevan section by November 2008,“ Movsisyan added.
The Iran-Armenia gas pipeline was officially inaugurated by Iranian President Mahmoud Ahmadinejad and his Armenian counterpart Robert Kocharian on March 19, 2007.
The project will provide Armenia with an alternative source of gas it currently imports from Russia.

Nabucco Pipeline
Iranian gas is an unavoidable source for the Nabucco pipeline project, which will supply fuel from the Caspian Sea region to Europe, Oil Minister Gholamhossein Nozari said.
“The Nabucco project cannot be carried out without Iran,“ Nozari said, adding that Europe will eventually need to turn to Iran.
The 3,300-kilometer pipeline aims to bring gas from the Caspian Sea via Turkey and the Balkans to Western Europe by 2013. The 7.9 billion-euro link is backed by the European Union to reduce energy dependence on Russia.
“Such a project would need years to become cost-efficient and Iran is the only country with sufficient reserves to supply Europe over an extended period,“ Nozari told Bloomberg.
Shareholders in Nabucco include OMV of Austria, MOL of Hungary, Transgaz of Romania, Bulgargaz of Bulgaria, BOTA of Turkey and RWE of Germany.
Iran is also seeking to build a $4 billion natural gas pipeline to the EU that may rival Nabucco. The country is considering the two pipelines as a means for exporting gas to Europe. The Pars Pipeline has been given priority.
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UK Lobby
Despite Iran’s important role in the global energy market, Britain says that it will pursue sanctions on the Islamic Republic’s oil and gas sectors as an important part of its political agenda.
In a Tuesday statement to the House of Commons, British Foreign Secretary David Miliband said Tehran’s refusal to halt its uranium enrichment would pave the way for imposing future oil and gas sanctions on the country.
“With respect to the prime minister’s promise to pursue oil and gas and other sanctions against the Iranian regime, I can assure (you) that remains an important part of our agenda both within the European Union and internationally,“ he added.
His remarks come as in a letter to EU foreign policy chief, Javier Solana, Iran’s top nuclear negotiator, Saeed Jalili, urged western countries on Monday to adopt a reasonable stance vis-ˆ-vis Tehran.
“It is amusing that the reasonable questions we raise in the course of nuclear talks are always met with pressure rather than logical answers,“ said Jalili.
Despite its inability to provide evidence in support of their allegations against Iran’s nuclear program, the West has so far imposed three rounds of illegal sanctions on Iran in a bid to pressure the country into halting uranium enrichment.

Ineffective Pressure
According to the International Herald Tribune, a high-profile natural gas conference sponsored in part by two of Europe’s largest energy companies on October 4 in Tehran was evidence that American and European pressures were ineffective in preventing the country from developing its vast oil and gas resources.
The two-day conference was sponsored by European energy giants Total of France and OMV AG of Austria, as well as Crescent Petroleum of the United Arab Emirates.
“Participation of European companies and their interest in investing in Iran’s oil and gas sector, despite strong US and Israeli pressures, shows that economic interests supersede political considerations,“ the daily said.
Russia currently supplies a third of European Union oil imports and more than 40 percent of the natural gas EU countries buy from abroad. But Russia’s recent conflict with Georgia and the country’s decision to cut off gas to Ukraine in January 2006 over a price dispute have fueled Europe’s efforts to diversify its energy sources and supply routes.
“Development of new transport routes, especially with Iran, is the key prerequisite to enlarge European import capacities for new supply sources,“ said OMV Senior Vice President Michael Peisser, who addressed the conference on Saturday.

98% of Agro Output by Private Sector
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Iran’s private sector handles close to 98 percent of agricultural production, said deputy agricultural jihad minister for industrial and infrastructural affairs.
Speaking at the inaugural ceremony of the Second National Exhibition of Irrigation Equipment and Agricultural Machineries, Farid Ejlali explained that the exhibition has unique features, Mehr News Agency reported.
“The private sector has made significant contributions for holding the fair,“ he said.
The official underlined that the country supports open economy.
Based on Article 44 of Iran’s Constitution, all affairs should be handed over to the private sector.
“Although the agriculture sector plays a critical role in people’s livelihood, its potentials have not been tapped in economic and employment issues,“ he said.
Ejlali noted that the agriculture sector’s share in employment, gross domestic product, state budget and media is close to 24.5, 13.5, 9.8 and 2 percent respectively.
“The country has currently raised agricultural output to 100 million tons from 25 million tons in 1979. In addition, the agriculture sector has seen a remarkable growth in the production of farm machineries,“ he concluded.

Concern Over Falling Oil Prices
Iran is concerned that the deepening global financial crisis is having a bigger impact on oil demand growth than previously expected, the Islamic Republic’s OPEC governor said on Tuesday.
It is too early to say if the Organization of Petroleum Exporting Countries (OPEC) will have to cut production at its December meeting to match lower demand growth, Mohammad Ali Khatibi told Reuters in an interview.
“We are worried about demand,“ he said. “The financial crisis is deeper than we expected and this is definitely influencing world oil demand.“
OPEC, source of more than a third of the world’s oil, may have to revise down its forecast for demand growth of around 900,000 barrels per day (bpd) in 2009, he said.
The Iranian official noted that to date, Iran has noticed no slackening in demand for its crude from Asia.
“The financial problems seem to be spreading, but Asia remains the engine of oil demand growth and we haven’t yet seen any indication that demand has been influenced,“ he added.
Khatibi stressed that there are no moves among OPEC members to hold an emergency meeting before December.
US oil fell to an eight-month low on Monday of $87.56 on concern that the world economy would fall into recession. Iran says a price of oil below $100 is unsuitable for both consumers and producers.

Call for Promoting Insurance
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People take less risk in monetary and banking sectors, said minister of labor and social affairs.
Mohammad Jahromi added that the insurance system must play a more significant role in the economic arenas, Fars News Agency reported.
The minister noted that the insurance culture and its positive effects must be promoted in the country more than before.
“Currently, the financial circulation in Iran’s insurance system is meager, he said, stressing that it should exceed $150 billion.
In 2005, Iran’s share of the global insurance market grew sixfold to 0.06 percent from a meager 0.01 percent in 1994.
At the same time, Iran boosted its share of the Asian insurance market from 0.04 percent in 1994 to 0.26 percent.
In the Middle East, the insurance industry increased its share from 3.24 percent in 1994 to 13.38 percent, marking an increase of 4.1 percent.
During the same period, Iran improved its global ranking for premium generation from 61 to 46.

Reviving Ancient Trade Route
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Iran, Russia, India and Oman inked the North-South Transport Corridor agreement in September 2000.
Compiled by Ghanbar Naderi

A tripartite meeting on the International North-South Transport Corridor (INSTC) began in Baku, Azerbaijan, on Tuesday with the participation of Iranian, Azeri and Russian transport experts and officials.
A delegation led by Deputy Managing Director of Iran’s Railways Mahmoud Reza Keimanesh attended the gathering.
As reported by IRNA, the participants reviewed the ways to accelerate executive works on the construction of INSTC as well as the rail links between the three states.
They also conferred on establishing an 8-km railway on Azeri soil that will connect the country to Iran.
Under the International North-South Transport Corridor project, close to 300km railroad will be built on the Iranian soil. Iran, Russia, India and Oman inked the INSTC agreement in September 2000.
Economic experts believe that once completed the corridor will halve the rail journey from South-East Asia to Europe via the Persian Gulf, Iran and Azerbaijan.
At the moment, it takes 45 days to travel from the South-East Asian countries to the European continent.

Revived Route
The corridor stretches from ports in India across the Arabian Sea to the southern Iranian port of Bandar Abbas, where goods then transit Iran and the Caspian Sea to ports in Russia’s sector of the Caspian.
From there, the route stretches along the Volga River via Moscow to northern Europe.
Indian cargo transported via this route has increased dramatically over the past year, reversing the dramatic decline of the 1990s.
In the Soviet era, millions of tons of transit cargo passed from Europe to Iran every year via the USSR and between the USSR and India along this route.
Small shipments of tea and tobacco first made their way to Russia from India through Iran in 2000.
Russia exports mainly metals, timber, paper, machinery and chemicals to Iran, while Iran sends mainly foodstuffs, cars and buses to Russia. The revived route is expected to offer both quicker and cheaper transportation than the primary alternative--the shipment of goods from South Asia through the Mediterranean and Suez Canal and then into the Atlantic and North Sea to Baltic ports.
Russian analysts predict that delivery time using the International North-South Transport Corridor will be reduced anywhere from 10-20 days, and that the cost per container will decrease by $400-$500. Moreover, they estimate the Russian government will alone receive hundreds of millions, even billions, of dollars from taxes and customs revenues.
The project’s momentum has steadily increased in the past year.

Implications
While political and economic challenges remain in the development of an overarching North-South Transport Corridor, important bilateral trade and transport agreements have been signed in tandem with the official North-South project.
Iran sees itself playing a particularly active role in forging trade and market links with Central Asia.
Several agreements on trade and transport projects have already been signed.
A transport corridor through Turkmenistan already exists between Iran and Uzbekistan, and the development of an additional route via Afghanistan is under discussion.
Iran has most actively promoted relations with Kazakhstan and Azerbaijan, two countries that have voiced strong interest in joining the North-South Transport Corridor project and in expanding trade and transport relations with Tehran.
Kazakhstan’s foreign policy has carefully balanced relations with its neighbors, with a particular focus on ensuring multiple export routes for its vast energy reserves. Thus, while it has pursued its relationship with Russia bilaterally regarding Caspian issues, Kazakhstan also began to supply oil products to Iran by rail in May 2002.
Azerbaijan, which has largely focused on the East-West energy corridor, has also voiced support for the North-South transport project.
The construction of a 350km rail track between Azerbaijan and Iran and the rehabilitation of the existing Baku-Astara railroad are under discussion.

Conclusion
The International North-South Transport Corridor project is making strides towards achieving a new framework.
The project has the potential to incorporate other interested states, including countries of the Caucasus, Central Asia and Eastern Europe, and also Oman.
However, history shows the difficulty of developing regional transport projects.
The Trans-Siberian Railway once hailed as an important strategic and economic project, now moves only about 10,000 containers per year mainly due to a lack of service reliability.
At the same time, the official North-South Transport Corridor project must be seen in light of a broader attempt by regional Central Asian countries to create as many trade and transport opportunities as possible.
Today’s developments mirror the continually evolving system of multiple routes and relationships of the historic Silk Road.

Iran Crucial for Global Oil Supply
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The United Nations Industrial Development Organization’s (UNIDO) representative to Iran said the country, which is an influential OPEC oil producer and founder, has undoubtedly played an important role in supplying energy worldwide.
Speaking at an energy seminar held in Tehran on Tuesday, W. Gong added that all countries need oil as the driving force of their economy, IRNA wrote.
“Oil production and consumption has turned into one of the most important criteria for measuring the rate of economic development in the world,“ he said.
Stating that UNIDO is responsible for promoting industrialization in developing countries, Gong said energy and environment are the main priorities of the UN body for global development. He also underlined that UNIDO enjoys expertise and technical capabilities in energy-related areas, development of private sector, promoting investment and environment-friendly production.

Restrictions for Car Imports
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Under a new plan drafted by the Commerce Ministry and Iran’s Customs Administration, new restrictions will soon be imposed on individual car imports from abroad, especially Dubai.
Head of Institute of Standards and Industrial Research of Iran, Nezameddin Barzegari told Iran Daily’s Sadeq Dehqan that only car brands which offer after-sales services will be allowed to enter the country.
According to him, the institute will step up its efforts to oversee the production of standard cars in Iran starting from this month.
On contaminated Chinese milk, he said all milk imports are supervised by the institute and so far there has been no cases of contamination.
However, last week, Iran banned the import of dairy products from China because of contamination concerns. According to the Health Ministry, the ban is in place until further notice. The ministry is assigning health workers to demolish Chinese dairy products currently on the Iranian market.

Vast Economic Potential Lauded
A specialist business magazine attests that Iran’s economy has many outstanding investment opportunities open to international firms.
Business Monitor International (BMI) scrutinized Article 44 of the Islamic Republic of Iran’s Constitution and announced that there are several significant investment prospects for Iran’s economy.
According to BMI, Iran has provided numerous investment opportunities for domestic and foreign investors, particularly on its stock exchange.
Business Monitor believes that the privatization of state companies and low stock prices implemented under Article 44 have greatly motivated foreign investors to take part in Iran’s economic activities.
In addition, during the current year, the price index of Tehran Stock Exchange has increased by 28 percent over the previous year. Business Monitor International is a leading print and online publisher of specialist business information on global emerging markets.

Sagem to Expand Trade
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The export affairs director of the French company Sagem said the company will ignore politics when inking trade deals with the country.
Addressing a seminar in Tehran on the strategies of the company in Iran, Eric Ricard called for expansion of trade cooperation with the Islamic Republic, according to Mehr News Agency.
The official said his Sagem’s annual sales stand at around 1.3 billion euros, adding that the company sells 1.4 million euros worth of fax machines per annum.
Sagem Communications, which took over Philips Fax Business Unit in 2002, owns 90 percent of Europe’s telecommunication and office appliances market.
Its director reiterated that his company tends to expand trade exchange with Iran regardless of political issues.
“We are in Iran to expand trade with the country and the political issues do not concern us,“ maintained Ricard.
Sagem (Company of General Applications of Electricity and Mechanics) is a major French company involved in defense electronics, consumer electronics and communication systems. According to its director, the company is in demand of expanding trade with the Islamic Republic.
Elaborating on the annual sale of the company which has been integrated with Philips Company and bought its stocks, he said that the annual sale of the company stands at 1.3 billion euros and that the company has been turned into Europe’s first brand and it has 90 percent of Europe’s telecommunications market.
Sagem Company has manufactured its products in concord with the taste of the Iranian consumers. The company aims to expand its presence and after-sales services in Iran.

Broader Customs Ties With Poland
Iran and Poland will increase customs cooperation to fight drug trafficking and illegal trade, an official told IRNA.
Managing Director of international cooperation office of Islamic Republic of Iran’s Customs Administration made the remark in a meeting with a visiting Polish delegation in Tehran.
“Modern customs and administrative methods play a key role in combating drug trafficking and illegal trade across the borders,“ Mohammad-Hossein Baqenayat said.
He also called for cooperation between the two countries in other customs affairs. “The Islamic Republic has very close relations with the Regional Intelligence Liaison Office (RILO) in combating drug smuggling,“ he said.
Meanwhile, In order to expand economic cooperation and increase commercial transactions, Iran’s Customs Administration signed have inked several customs cooperation agreements with a number of countries.
The agreements deal with a collection of related information regarding executive customs law and regulations, exchange of information with an aim of ensuring enforcement of customs regulations, and employment of the latest technologies to promote efficiency and classifications of tariffs.

OVL in Oil Talks
ONGC Videsh Ltd (OVL), the overseas arm of India’s largest oil producer, Oil and Natural Gas Corporation (ONGC), is holding talks with the Iranian government for exploring an oil block in the northern part of the country.
Chinese company Sinopec is also believed to be in the race for the block. This could not be independently confirmed, though. The block is near the Caspian Sea.
“OVL has been talking to us for an oil block in Northern Iran. A Chinese company is also interested,“ Business Standard quoted an Iranian official who did not want to be named as saying.
ONGC and OVL officials declined to comment on the specific proposal saying OVL was always looking to acquire assets across the world.
OVL is spearheading India’s effort to secure oil assets abroad as Asia’s third-largest economy imports more than 70 percent of the oil it consumes. The integrated energy policy, recently approved by the Indian Cabinet, lays emphasis on buying energy assets abroad.

5-Year Comprehensive Plan
The government and the parliament have agreed to draft a five-year
comprehensive agricultural plan to resolve chronic problems such as drought.

New Cement Factory
Isfahan’s giant Saruj Cement Factory came on stream on Wednesday in a special ceremony attended by Industries and Mines Minister Ali Akbar Mehrabian.

EconomyCol3
IMF Warns of Severe Downturn
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The economic downturn in many countries is likely to worsen as the financial crisis continues, the International Monetary Fund (IMF) has warned.
The global economy is now showing signs of a marked slowdown in growth, said the IMF in its latest world economic outlook report.
In said coherent and decisive policy measures were now needed to restore financial confidence.
The IMF report comes before this week’s IMF-World Bank meeting in the US.
In the report, the IMF also warned that the turmoil so far largely confined to the financial sector was likely to spread.
It estimated financial losses from the credit crisis would total $1.4 trillion, up from an earlier estimate of $1 trillion. It said problems in the money markets were now more likely to be associated with severe and protracted economic downturns in the rest of the economy.

Panic Among PGCC Investors
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Stock markets plunged across the Persian Gulf Arab states as panic over the global financial crisis gripped investors, wiping billions of dollars off the value of shares.
Investors took a dim view of paltry European efforts to shore up unsettled markets, which sent US and European equity stocks lower, Arab News reported.
The market in Saudi Arabia sank by over 7 percent while the biggest percentage loss was reported in Egypt, where the key index plummeted by more than 16 percent to its lowest level in two years.
Officials from Saudi Arabia, Kuwait, Qatar and Oman moved to reassure investors that the decline in regional markets was merely temporary and said their economies were strong. Kuwait’s Commerce and Industry Minister Ahmad Baqer also spoke out, saying the market decline was due to global panic and urged companies to buy back shares to support the market.

China Hiring Wall Street Experts
Some of the Wall Street professionals may soon be working for Chinese financial houses.
The China Daily reports the widespread Wall Street layoffs have created opportunities for Chinese firms to hire these professionals to take advantage of their expertise in global capital markets.
The newspaper said some major Chinese investment banks and stock brokerages have begun hiring such professionals both in the United States and Europe, especially those with knowledge of international markets and research experience.

US Budget Deficit Soars
The US government’s budget deficit ballooned in fiscal 2008 to $438 billion, or 3.1 percent of GDP, as the economic downturn began to bite, the Congressional Budget Office (CBO) said.
The estimate compares to the $162 billion shortfall that represented 1.2 percent of GDP in fiscal 2007, said the CBO, which monitors federal spending on behalf of the Senate and House of Representatives, according to AFP.
“That is about $31 billion higher than the 407-billion-dollar deficit CBO projected this summer, primarily due to lower-than-projected revenues and higher-than-expected spending for defense and deposit insurance,“ it said.

Singapore Heading for Recession
Singapore appears headed for its first recession since 2002 as the city-state suffers from a US economy wilting under its worst financial crisis since the Great Depression.
According to AP, Southeast Asia’s wealthiest economy in terms of GDP per capita is heavily dependent on trade, which makes it sensitive to hiccups in developed economies, particularly key export markets--the US and Europe.
The crisis that began last year in the US subprime, or higher-risk, mortgage sector is now infecting European shores, and Singapore may very likely find itself in an extended downturn.

Iceland Bank Nationalized
Iceland nationalized its second-largest bank under emergency legislation and said it was negotiating a 4-billion-euro loan from Russia to shore up the nation’s finances amid a full-blown financial crisis.
The central bank also loaned 500 million euros to Kaupthing, the country’s biggest bank, to tide it through the crisis, the Interfax news agency said.