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Domestic Economy
Wed, Dec 10, 2008

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Oil Prices Rebound
New TSE System Launched
Iran Air Growth Upbeat
BMI Offers 30% of Credits
Caviar Export to Hit $22m
$700m Allocated for Transportation
New Refineries Planned
Japan Signs Agro Deal
Economic Potentials Highlighted

Oil Prices Rebound
Oil prices rebounded on Monday after slumping under $40 a barrel to near four-year lows before the weekend on news of massive job losses in the United States, the world’s biggest energy consumer.
Analysts said that gains were driven by expectations the Organization of Petroleum Exporting Countries (OPEC) could slash its output later this month.
Despite the recovery, underlying sentiment remained fragile on deep concerns about weak energy demand, especially in the recession-hit United States, traders told AFP.
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Price gains were driven by expectations that OPEC could slash its output later this month.
Jump
In late afternoon trading on London’s InterContinental Exchange (ICE), Brent North Sea crude for delivery in January jumped $2.93 to $42.67 a barrel. Light sweet crude for January rallied $2.91 to $43.72 on the New York Mercantile Exchange (NYMEX).
“Oil futures were higher as it looked increasingly like OPEC will respond to the sharp decline in oil prices by cutting output later this month,“ said Sucden analyst Michael Davies. “Libya’s top oil official, Shukri Ghanem, said OPEC should make a substantial cut in output at next week’s meeting.“
The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s crude, is widely expected to agree on an oil production cut when it meets in Oran, Algeria on December 17.
Prices also won support on Monday from rebounding global stock markets as investors eyed prospects for fresh government action against the ongoing global financial crisis, analysts said.
World equity markets took flight on Monday, with spectacular gains in Europe, on renewed prospects for robust government recession-fighting action.
European markets closed with advances ranging from 6.0 to 10 percent after a strong showing in Asia, as the impact of a dismal US employment report was overcome by news of a big public works spending plan in the United States.
Wall Street also vaulted higher at the opening, fuelled by hopes the huge stimulus planned by President-elect Barack Obama would ease the worldwide financial crisis.
On Friday, Brent crude had tumbled below $40 after the US Labor Department reported that employers slashed 533,000 jobs in November, sending the unemployment rate to a 15-year high of 6.7 percent.
The number of job losses was the largest in 34 years and much higher than the 325,000 expected by private forecasters, suggesting the recession in the world’s largest economy would be longer and deeper than feared.
Oil prices have plunged by more than two-thirds since reaching record highs above $147 on July 11 as a global economic slowdown weakens energy demand.
“I think we have seen a modest recovery in oil prices following very heavy declines last Friday,“ David Moore, a Sydney-based commodity analyst with the Commonwealth Bank of Australia, said.
“At this point, I think the concerns of weakening oil consumption has not gone away. The US job figures were very weak and reinforced worries about weak oil consumption,“ he added.

Ecuador Meeting
Ecuador will hold an OPEC summit meeting should the organization fail to curb the downward trend in crude prices in its meeting next week.
“The current price of oil is artificial just as it was at $140 a barrel,“ Ecuador’s President Rafael Correa said while touring Iran’s southern port city of Assaluyeh.
The president visited phases 2, 3, 9 and 10 of the South Pars gas field and Noori Petrochemical Complex in the special economic and energy zone.
“If the problem is not solved at the next OPEC meeting, Ecuador has decided to convene a summit of heads of states to stop the drop in prices,“ IRNA quoted Correa as saying on Monday.
Both Iran and Ecuador are OPEC members, which are scheduled to meet in Oran, Algeria, on December 17.
The 13-member organization held an emergency session late November in Cairo without announcing any specific production cuts. OPEC’s head has, however, indicated that the organization may opt for a major output cut if crude prices continue to fall.
“We can’t say how much the output cut will be in December, but for sure there will be an action because we’re seeing that stocks are high,“ Abdalla Salem El-Badri told reporters last week on the sidelines of the 13th International Seminar on Oil and Gas in Tehran. “I cannot tell you the size of the cut but it will be a good amount,“ he said.

New TSE System Launched
A new bourse transaction system was launched at the Tehran Stock Exchange (TSE) on Monday with Minister of Economic Affairs and Finance Shamseddin Hosseini in attendance.
According to IRIB, the new system will lead to a tenfold increase in bourse transactions.
The TSE is Iran’s largest stock exchange, which first opened in April 1968. It is based in Tehran. As of June 2008, 400 companies, with a market capitalization of $70 Billion were listed on the TSE.
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In 2007, there were 324 companies listed on the TSE with a total market capitalization of over $42 billion from a myriad of sectors in the economy. Close to 60 percent of the market capitalization relate to listed companies from the basic metals, motor vehicles and trailers, chemicals and byproducts, and non-metallic minerals products sectors. A total of 161 companies from the said sectors are listed on the TSE, which translates to 49.7 percent of total companies listed on the TSE.
Largest stocks pertain to Mobarakeh Steel Company. This indicates that the capital market in Tehran is heavily concentrated on economic sectors with companies that make up nearly half of the total listed companies on the exchange. While 163 companies listed are spread out amongst 26 sectors, with the food and beverages sector alone accounting to 32 companies with a market capitalization of over $89 million.
However, the manager of Tehran Stock Exchange Software Unit said the new system will make it possible to purchase and sell stocks on the same day.
Maryam Hosseinkhani added that the system has also made it possible for 2,000 brokerage stations to work simultaneously, while the number was just about 480 in the past.
She referred to the rise in electronic dealing, non-stop input and updated data on orders, transactions and indices among other features of the new system.
“The new system has made it possible to link the stock market to the international bourses. The bourse can now handle 700 transactions per second and 150,000 transactions per day,“ she said.

Iran Air Growth Upbeat
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The managing director of Islamic Republic of Iran Airlines (Iran Air) said despite illegal sanctions the company has managed to raise the number of its aviation fleet, provide technical-engineering services to other airlines, and ensure flight safety.
Saeed Hesami told Inn.ir that despite the sanctions regime, the growth in the industry has been upbeat.
He put the number of airplanes at 146, of which 55 belong to Iran Air. “A major part of maintenance operations are also carried out by the Iranian engineers. Given its well-established record, Iran Air controls the biggest share of cargo and passenger transport market.“
According to him, the company’s safety standards also have been approved by the European Union’s Safety Assessment of Foreign Aircraft (SAFA).
Iran Air is the flag carrier airline of Iran, based in Tehran. It operates services to 20 scheduled and 5 charter destinations. The cargo fleet operates services to 35 international and 25 domestic destinations. Its main base is Imam Khomeini International Airport (IKIA).

BMI Offers 30% of Credits
Bank Melli Iran (BMI) has offered close to 30 percent of all credits to economic, production, industrial and services sectors, said its managing director.
Ali Sedqi said BMI began work with five branches and 16 personnel 80 years ago. “Now, it is a giant financial institute, which has helped establish many other monetary and financial bodies,“ he told Fars News Agency.
According to the official, the bank has played a key role in helping to implement national development projects over the past 80 years.
Sedqi named some of the recent projects financed by the bank as construction of Navvab Highway (in Tehran) as well as expansion of industrial units, petrochemical complexes, textile factories and export promotion.
BMI is the first national Iranian bank. It was established in 1927 by the order of Majlis and since then has consistently been one of the most influential banks.
BMI was established to provide banking services to the government, local businesses and ordinary people. In 1931, the Majlis authorized the bank to print and distribute the currency rial. BMI acted as the central bank until the Central Bank of Iran (CBI) was established in 1960, after which all of its central banking responsibilities were transferred to the CBI.
Over the past 80 years, BMI has grown to become a large retail bank with several domestic and international branches. BMI opened its first foreign branch in Hamburg, Germany in 1965. It is now the largest commercial retail bank in Iran with over 3,300 branches and 43,000 employees.

Caviar Export to Hit $22m
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The export value of Iranian caviar is expected to reach $22 million by March 2009, an official of the Ministry of Agricultural Jihad told IRNA.
Managing Director of Agricultural Services Holding Company Nasrollah Khadem said the country harvested 10.2 tons of caviar last year, of which 7 tons were exported, earning $22 million.
The Caspian Sea once accounted for 95 percent of the world caviar, although this percentage is now closer to 90 percent. Official catch levels have fallen from a peak of about 30,000 tons in the late 1970s to less than one tenth that figure these years. Reduced river flows, the destruction of spawning sites, corruption, poaching, organized crime and illicit trade have all contributed to the decline.
One result is that the illegal catch in the four former Soviet republics is now 10 or 12 times higher than the legal take. The legal caviar trade is estimated to be worth $100 million annually. Because prices of illegal caviar vary widely from country to country, it is difficult to estimate the value of illegal trade, but it is clearly enormous.
Iran has already firmed up its demand for a share of around 20 percent of the Caspian Sea. There are five Caspian sea states, Iran, Russia, Kazakhstan, Azerbaijan and Turkmenistan. In October, at a summit in Tehran, the five states pledged to work out an agreement to divide the sea but have not agreed on the boundaries yet.
The sea is also a source of oil reserves. In terms of caviar the question isn’t just access to the sturgeon but also how much caviar, if any, should be harvested. The sturgeon, which can live to over 100 years but mature slowly, are being fished out of existence by the former Soviet republics.
Meanwhile, the black market in caviar continues apace, especially in Russia where the growing ranks of big spenders have an increasing demand for the delicacy. This occurs just as depleted sturgeon stocks have led to bans on caviar.

$700m Allocated for Transportation
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Iran’s Export Development Bank (EDB) has allocated $700 million to the transportation sector in a bid to enhance exports, its managing director told Mehr News Agency.
“The EDB plans to pay $200 million to the air, $200 million to the rail and $300 million to the marine transportation sectors this year,“ Kourosh Parvizian added.
According to the official, the geographic location permits the country to play a significant role in political and economical consideration of the Middle East and central Asia. Iran is surrounded by the Caspian Sea, Afghanistan, Pakistan, Turkey and Persian Gulf neighbors. But central Asian countries in this list have special situation because there are no restrain to the former trade routes and export import logistics.
He went on to explain that Central Asian countries’ structural dependency on Russian economy and lack of communication infrastructure make them to think about their logistic routes restrain seriously and expand relations with neighboring countries such as Iran.
Experts are also of the opinion that transportation network in central Asia region has crucial role in Iran’s regional abilities as it will help renovate its trade activities with other CIS countries and expand foreign trade with other parts of the world.
To this end, Russia, Iran and India reached multilateral agreements to improve and escalate goods movement between Asia and Europe. Under the deal signed in Strasburg, they agreed to build a corridor via Iran’s Caspian Sea route to Russia and Finland.
This railroad is the shortest among different options which will help curtail time of cargo movement to destination from 35-40 days to 21-223 days.

New Refineries Planned
Iran plans to construct seven oil refineries at a cost of $27 billion by 2013, according to a senior oil ministry official.
“After the inauguration of these seven refineries, the production capacity of the country in gasoline and gas-oil will increase by 190 and 180 million liters per day respectively,“ said Noureddin Shahnazizadeh, caretaker of the National Iranian Oil Refining and Distribution Company (NIORDC).
According to IRNA, the move is aimed at sharply increasing Iran’s refining capacity in an attempt to cut gasoline imports.
Iran, the world’s fourth largest oil producer, lacks adequate refining facilities to produce gasoline and allocates huge sums to import gas, which burdens state coffers.
In June 2007, President Ahmadinejad introduced a gasoline-rationing program under which private cars get a maximum of 100 liters of petrol per month.
Shahnazizadeh said the private sector would be responsible for the execution of the plans, noting that NIORDC will only finance “10 to 20 percent“ of the project.
Meanwhile, Iran has denied reports that its oil output was exceeding the quota set by the Organization of Petroleum Exporting Countries (OPEC).
“Iran is fully adhering to its OPEC commitment to reduce output,“ Mohammad Ali Khatibi, Iran’s representative to OPEC told Reuters.
The comment came after the head of National Iranian Oil Company, Seifollah Jashnsaz, was quoted on Saturday as saying that Iran was producing around 4.05-4.08 million barrels per day (bpd).
Khatibi confirmed that the figure quoted by Jashnsaz was the average daily output so far this year and did not refer to the current output.
“He didn’t mean we are producing this amount now. We fully adhere to our commitment,“ Khatibi said, adding that the country’s output stood at 3.8 million bpd.
Iran has cut production by 199,000 bpd as required under OPEC’s October agreement to reduce total OPEC supply by 1.5 million bpd. The decision came in response to plunging global prices for crude oil, prompted by fears of a credit-crunch and recession in major oil consuming nations.

Japan Signs Agro Deal
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Iran and Japan signed a cooperation agreement on agriculture in Tehran Monday.
The agreement, signed by the representatives of Japan’s Embassy in Tehran and the agricultural departments of Yazd and Kerman provinces, envisages cooperation in setting up a processing unit for agricultural products in Rafsanjan (Kerman) and a chicken farm in Tabaq (Yazd).
Meanwhile, an Iranian official conferred with the deputy head of Japan External Trade Organization (JETRO) on finding ways to revive the pistachio market in that country.
Deputy Head of Iran’s Trade Development Organization Ali Houshmandi-Manesh told IRNA on Monday that the country’s pistachio is exported to European and Asian countries.
“Unfortunately, the Japanese market for the product is not up to the mark yet, he said, hoping that the problem will be solved through collaboration with JETRO.
He called on the Japanese institute to support Iran’s membership in the Asian Trade Promotion Forum (ATPF) the secretariat of which is in Japan.
Given the fact that Iran has been accepted as an observer member to the World Trade Organization (WTO), Japan will hopefully help it in this respect, he noted.
Yashhiri Yamada, for his part, expressed his country’s interest in expanding commercial ties with Iran and said Tokyo is ready to do anything to help Tehran.
“Iran has numerous capabilities in producing pistachio, saffron and medicinal plants, and Japan is eager to help expand trade in these fields,“ he added.
Last year, Iran exported $927 million worth of raw materials and commodities to Japan, and imported $1.325 billion.

Economic Potentials Highlighted
Minister of Economic Affairs and Finance Shamseddin Hosseini said the economy is assessed by a number of indicators such as economic growth, unemployment, inflation as well as the distribution of income.
“We believe the Iranian economy has, in the past couple of decades, experienced a number of achievements. But indicators show that we haven’t been able to reach our goals very well,“ he told Press TV in an exclusive interview on Monday.
The official added, “There have been fluctuations in our economy. Unemployment is going down to 10 percent but remains a two-digit figure. The distribution of our income is rather disproportioned, which shows that we are not reaching our potential in economic fields yet.
“We have all the factors of growth. As far as national and financial resources as well as human resources are concerned, we have great potentials. Studies show that one of the major issues is how to allocate these resources. Our methods of allocation have been rather detailed, resulting in Iran having a lower efficiency.
“One of the problems that we have, for example, relates to the unrealistic energy prices we have. Around 30 percent of our GDP goes to energy subsidy, which results in a broken method of distributing the national income. It also dampens the enthusiasm of the private sector and their investments. Thus, we have concluded that our economy is in need of reform.“
The official stated, “The same goes for our taxation system. Studies show that the revenues generated by our taxation system are not enough. While a maximum of 8 percent of our GDP comes from taxation, there is the potential for it to become at least 20 percent. Thus, we have been forced to rely on other resources such as crude oil.“

Aluminum Output
Almost 360,000 tons of aluminum will be produced next year, said the head of Mining Industries Development and Renovation Organization, Ahmad Ali Haratinik.

UNIDO Cooperation
Minister of Industries and Mines Ali Akbar Mehrabian and
Director-General of UN Industrial Development Organization (UNIDO) Kandeh K. Yumkella called for closer cooperation on Monday.

EconomyCol3
Collapse of PGCC Banks Unlikely
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Persian Gulf-based banks have so far escaped the impact of the global financial crisis and are unlikely to suffer from any collapse due to strong government support.
The Washington-based Institute of International Finance (IIF) said in a study that despite the plunge in oil prices, the PGCC states have enormous budget and current account surpluses which leave them in a position to intervene and prevent the collapse of key regional banks, Arabian Business wrote.
The report added that indications from the PGCC banks and other financial institutions showed they are in a generally strong position.

Japan Recession Deepens
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Japan has sunk deeper into recession in the three months to September than had been expected, new figures indicate. The economy, the second largest in the world after the US, shrank by 0.5 percent, for an annualized rate of 1.8 percent, significantly greater than expected, Japan Times wrote.
Japanese firms are closing factories and laying off staff in the face of declining demand and a rising yen. Prime Minister Taro Aso has promised public spending to soften the impact of the recession.
There has been an almost constant stream of bad news from Japanese companies over the past few weeks, so it does not come as a great surprise that the recession in Japan is deepening. What is alarming is how quickly the situation is getting worse.

Asian Commodity Stocks Gain
Asian commodity stocks and shipping lines gained on expectations global stimulus plans from the US to India will boost profits, countering concern capital-raising plans by financial companies will dilute shareholdings.
BHP Billiton Ltd. rose 4.8 percent in Sydney, and China Cosco Holdings Co., the largest operator of iron-ore and coal ships, surged 12 percent in Hong Kong, Bloomberg reported.
Singapore and Indonesia’s benchmark indexes jumped more than 4 percent after being shut, when a plan by US President-elect Barack Obama to boost the economy led the MSCI World Index to a 5.5-percent gain. Commonwealth Bank of Australia fell 8.2 percent after Westpac Banking Corp. said it may raise $1.7 billion in a share sale.

UK Housing Sales Fall
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UK home sales declined to the lowest level since at least 1978, as Britain plunged deeper into a recession.
According to BBC, real-estate agents and surveyors sold an average of 10.6 homes in the quarter through November, the least since the series began three decades ago. A separate report showed retail sales fell in two consecutive months for the first time since at least 1995.
The Bank of England last week reduced the benchmark interest rate to 2 percent, the lowest in a half-century, as policymakers sought to prevent deflation from taking hold in the economy. With homebuyers shunning the housing market and a squeeze on bank lending, Central Bank Governor Mervyn King has refused to rule out cutting the rate to zero.

Push for US Auto Bailout Deal
The fate of the US auto industry and millions of jobs are on the line as major players work out details on Tuesday of a plan to extend emergency loans to the Big Three automakers in exchange for tougher oversight.
Congressional Democrats and the White House have been in talks for several days to finalize an emergency loan package estimated to be worth up to $15 billion to prevent the collapse of General Motors Corp and Chrysler LLC. Longer-term help also could be on the way if certain conditions were met, Reuters reported.
Ford announced on Monday that it would not seek short-term federal aid.
The US economy hemorrhaged more than 530,000 jobs in November, further increasing the urgency for help to stop the collapse of GM and Chrysler.

Chrysler, Chery Call Off Ties
Chrysler and China’s biggest domestic automaker said on Tuesday they have called off talks on cooperation due to the global financial crisis.
The proposed partnership with Chery Automobile Co., first announced in July 2007, was meant to produce a low-cost model in China to be sold under Chrysler’s Dodge brand in the United States and Europe, AFP reported.
Auburn Hills, Michigan-based Chrysler LLC, which is seeking US government aid to avoid a financial collapse, had hoped the Chery partnership would add to its small car lineup following its May 2007 split with Germany’s Daimler AG.