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Domestic Economy
Thu, Aug 06, 2009

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Secret Move to Shun IP Gas Project
Int’l Rail Freight Service Planned
Islamic Finance Rebounding
Iran-Belarus Roundtable
On Trade
Gas Exports to Oman
IKCO Plants Will Remain Open
Gasoline Imports Steady
Energy Shares Up for Grabs
Dairy Exports Up

Secret Move to Shun IP Gas Project
In a new development, Pakistan’s Inter-Services Intelligence (ISI) has jumped into the affairs of the much-touted Iran-Pakistan (IP) gas pipeline and has opposed the project.
The intelligence agency has suggested alternatives to acquire energy, UPI wrote.
The US has since long been opposing the project just to put pressure on Iran. Washington has time and again asked Islamabad to refrain from signing the gas deal with Tehran, Pakistan Observer said.
America has managed to pull India out of the project by offering the civil nuclear deal, but did not offer anything to Pakistan as an alternative to cope with its energy crisis.
However, the opposition to the IP project will adversely affect Pakistan’s economy and development.
China and Russia have shown interest in joining the strategic IP gas pipeline project.
Not Feasible
The copy of the letter written by ISI to Special Secretary of the Ministry of Petroleum and Natural Resources, GA Sabri shows that opposition to the IP project has its tentacles in the country’s intelligence agencies and they have thought it appropriate to oppose the project without solid arguments.
On the face of it, the agency’s letter does not apparently oppose the project but it can easily be inferred that it is interested to know alternative options for power generation from indigenous and imported sources other than the gas to be imported from Iran’s Pars gas field.
The agency’s letter also stressed alternative gas supply options from indigenous resources, making special mention of current and future explorations.
Pakistan and India were close to the deal, but US played its card very well and succeeded in keeping India away from the project.
An official of the concerned ministry: “Pakistan, which has since long been in energy crisis has no other option, which will be practical and cheap than importing gas. Yes, we have option to import gas from Turkmenistan for which US and other donor agencies are facilitating to materialize the TAPI project--Turkmenistan, Afghanistan, Pakistan and India.“
“The TAPI project is not feasible because of Afghanistan where the pipeline’s security cannot be ensured. Importing LNG and LPG in place of the IP project is also too costly,“ the official added.
The indigenous exploration of oil and gas is entangled with security issues in the country. Since long, no new exploration of oil and gas has taken place in Balochistan, which is rich in minerals.
The Pakistani official said the government has decided to table the IP project in the parliament to get the go-ahead, keeping in view the opposition from influential lobbies in Pakistan and foreign powers.
Pakistan finally signed the gas pipeline accord with Iran, without India’s participation, after 14 years of on-off negotiations over what was initially framed as the Iran-Pakistan-India (IPI) gas pipeline project.
Under the agreement signed between the National Iranian Oil Company and Interstate Gas System of Pakistan, Iran will provide 750 million cubic feet of gas per day to Pakistan for the next 25 years. Officials in Islamabad termed the deal a major breakthrough and an achievement that would greatly help Pakistan meet its energy needs.
The two countries signed the formal agreement for the multibillion dollar project in Turkey.

China’s Participation
Initially, the project was mooted in 1994 to carry gas from Iran to Pakistan and on to India. New Delhi withdrew from the talks last year over repeated disputes on prices, transit fees and security issues.
Later, China and Russia have shown interest in joining the strategic gas project. China said last year it would import about 1 billion cubic feet a day from Pakistan if India opted out.
Beijing has been pressuring Tehran for China’s participation in the pipeline project and Islamabad, while willing to sign a bilateral agreement with Iran, has also welcomed China’s participation.
According to an estimate, the pipeline would bring in $200 million to $500 million annually in transit fees alone for Pakistan.
China and Pakistan are already working on a proposal for laying a trans-Himalayan pipeline to carry Middle Eastern crude oil to western China. Pakistan provides China the shortest possible route to import oil from the Persian Gulf countries.
While India maintains that pricing and its commercial viability were the main sticking points in the IPI project, Pakistan accuses India of adopting delaying tactics and toeing the US line.
Iran got tired of waiting for New Delhi to come to terms on the proposed IPI project and expressed its readiness to see China to take over India’s place.

Int’l Rail Freight Service Planned
An international freight service linking Islamabad, Tehran and Istanbul will be launched on August 14, Pakistan’s Federal Minister for Railroads said.
“Iran will provide required transshipment facilities in its southeastern city of Zahedan until a standard railroad is laid between Zahedan and Mirjaveh,“ local Pakistani media quoted Haji Ghulam Ahmed Bilour as saying on Tuesday.
He added that international freight would reach its destination within 15 days, Presstv reported.
The Pakistani minister said the train service is 6,506 km long, 1,900 km of which pass through Pakistan, 2,570 km through Iran and 2,036 km through Turkey.
He said the planned train service will be operated as a pilot project of the Economic Cooperation Organization (ECO) in line with an accord signed by the three states in March this year.
Bilour said other ECO members, including Afghanistan, might also join the service after it is launched.
The minister said Turkey and Iran already have rail links at their borders and have rail services for both freight and passengers.
“The train service would be of great benefit to the business community of Pakistan, Turkey and Iran, and would help enhance trade and people-to-people contacts among the three important ECO countries,“ Bilour said.
“We are trying to line up soft credit with international financial institutions to resolve the issue related to rail gauge between Pakistan and Iran before it is made a full-grown train service.“

Islamic Finance Rebounding
The global financial crisis has accelerated what already was a growing interest in Islamic finance and created new opportunities for Islamic financial institutions as a result of problems in the conventional banking system.
“The financial crisis is creating opportunities from two sides,“ said Emad Al-Menaie, chairman and managing director of Liquidity Management House, which is owned by Kuwait Finance House, was quoted as saying by
“First, there is an ongoing return to basics in financial arrangements, with demand for transactions backed with the appropriate assets, which is a hallmark of Islamic finance. Bankers are looking more closely into the operating side of the businesses they finance and the capacity of their customers to produce the right revenues for a particular financial obligation,“ Al-Menaie explained.
“Second, investors are attracted to Islamic financial instruments because of their income-generating ability and capital appreciation.“
Kuwait Finance House, the largest Islamic lender in Kuwait, established Liquidity Management House in January 2008 to issue, purchase and trade sukuk, equivalent to Islamic bonds, with the goal of creating a global secondary market.
“The recent issuance of sovereign sukuk issues by Bahrain and Indonesia as well as the introduction of new global investment funds show that the market for sukuk is capturing momentum again,“ he said. “The more players there are, the more opportunities there are for trading.“
European Finance House, the London-based affiliate of Qatar Islamic Bank, announced the launch of its open-ended Global Sukuk Plus fund in May. The dollar-based fund is actively managed and offers weekly liquidity.
“The sukuk market is now a global phenomenon,“ said Mark Watts, head of asset management at European Finance House. “The global sukuk fund allows investors to tap into returns and profits not previously available, as the scale and diversification of investment have increased.“
The fund is predominantly invested in sukuk, comprising sovereign, quasi-sovereign and corporate issuers. Value could be added through investment in shariah-compliant debt or credit investments, such as syndicated murabahah (a form of cost-plus-fee financing), trade finance and structured investments.
“Islamic financial institutions have weathered the global financial crisis reasonably well,“ said Ala’a Al-Yousuf, London-based chief economist at Gulf Finance House. The vast majority of shariah-compliant institutions have been conducting their business in a conservative manner, and they avoided credit derivatives and other complex structured assets that turned toxic for conventional banks.
“Islamic principles require the structuring of financing facilities as profit-sharing agreements. As a result, the lender needs to fully understand the business of its customers,“ he said.
Bankers in general need to relearn a lot of lessons about sound banking that they may have forgotten, according to Al-Yousuf. “They need to go back to basic tenets of finance and not forget the fundamentals of credit analysis and knowing your customer.“

Iran-Belarus Roundtable
On Trade
Iranian exports to Belarus exceeded $400,000 last year. (Photo by Ali Hassanpour)
By Sadeq Dehqan

A specialized roundtable was held on Monday to examine ways of improving economic ties between Iran and Belarus and to familiarize traders and companies with the country’s investment capabilities and trade opportunities.
Head of Tehran’s Commercial Organization told the roundtable that at present trade exchanges between the two sides stands at about $100 million and the value of contracts for exporting technical and engineering services to Belarus has reached $1.7 billion.
“Based on the latest statistics compiled by the Customs Administration, in the first quarter of the current Iranian year (started March 21) the value of Iran’s exports to Belarus exceeded $400,000 last year and the total exchanges between the two sides valued more than that,“ added Seyyed Ali Mousavi.
He characterized prospects for bilateral ties as positive and said, “Currently, we have good ties with Belarus and as the president has underlined Iran faces no barriers in bolstering ties with the country and Belarus is the special priority of Iran’s foreign policy guidelines.“
The official recalled examining problems regarding exports to Belarus and finding reliable solutions to them at the presence of related officials was among the main objectives of the roundtable.
“This year, in order to improve bilateral trade ties, four trade delegations will be sent to Belarus and three trade delegations will be sent to Iran by Blearus. Furthermore, Iran will participate in energy and construction materials exhibitions in Belarus,“ he noted.
“In order to implement the agreements reached during President Mahmoud Ahmadinjead’s last year visit to Minsk for speedy expansion of the volume of bilateral trade to $1 billion, establishment of an investment firm, an Iranian bank and a trade center in Belarus is on agenda.“
Mousavi recalled that among his organization’s plan for expanding its presence in the Belarus market is dispatching a trade delegation to the country in September and participating in exhibitions to introduce the economic capabilities of Iran.
Elsewhere in his remarks, Mousavi said Belarus’s total trade volume in 2007 exceeded $52.968 billion, some 57 percent of which pertains to exchanges with Commonwealth of Independent States (CIS) and countries such as Germany, Poland, Holland and Britain.
He recalled that Iranian products exported to Belarus include raisin, pistachio nuts, dates, fig, car chassis and automotive spare parts.
Among products imported to the country by Belarus are textile, trucks, military hardware, truck chassis and ball bearings.
He described banking problems, administrative bureaucracy, absence of a joint chamber of commerce, visa problems and high transportation costs as hindrances to the two-way commercial exchanges.
Mousavi also said among the most important industries of Belarus are manufacturing tractors and heavy trucks, producing military equipment, electronic instruments, dairy products, wood and paper.
“Belarus is the third producer of tractor in the world after the US and Japan. In fact, Belarus produces about eight percent of tractors of the world and exports them to 35 countries. It also produces very large trucks with a capacity of 80 to 300 tons.“
Meanwhile, Iran’s Ambassador to Belarus Abdollah Hosseini, also addressing the roundtable, said the greatest advantage of making investments in Belarus is its exemplary security. “Moreover, this country is in a suitable position in terms of geopolitical considerations.“
He recalled that at present Iran’s political ties with Belarus is at the highest possible level. “Another advantage regarding investments in Belarus is that its embassy in Tehran renders extensive support to Iranian businessmen. It should also be noted that Belarus’s administrative system is very healthy. Its government is the healthiest among the CIS members.“
Belarus’s trade attachˇ in Tehran, Andry Sadovski, told the roundtable that his country is experiencing a sensitive juncture and it should not lose the opportunity to trade with Iran. “Based on the government’s plan, in the next five years GDP will increase by 150 percent.“

Gas Exports to Oman
Iran said it is ready to export gas to its southern neighbor Oman in a bid to materialize an earlier agreement between the two sides.
“Iran is ready to materialize the agreement for gas exports to Oman,“ Foreign Minister Manouchehr Mottaki said in an interview with the Omani state TV and news agency, referring to the two countries’ cooperation on energy, gas and petroleum, IRNA wrote.
Mottaki pointed to the visit by Omani King Qaboos bin Said Al-Said to Tehran on Tuesday and termed it important and effective in the improvement of relations in different fields.
He also reiterated that regional security, economic meltdown and energy status of the region were among the most significant issues discussed by the Omani King and Iranian officials.
“Oman’s policy of dˇtente and balance has always paved the way for the establishment of stability and security in the region,“ Mottaki added.
Sultan Qaboos, heading a high-ranking delegation, arrived in Iran on Tuesday to confer with the Islamic Republic officials on bilateral, regional and international issues of mutual interest.
Sultan Qaboos met President Mahmoud Ahmadinejad and Leader Ayatollah Seyyed Ali Khamenei.

IKCO Plants Will Remain Open
The deputy manager of Iran Khodro Company (IKCO) said none of its plants inside and outside the country will be shut down.
Mehr News Agency quoted Mir Javad Soleimani as saying that all of the domestic plants are making profit and plans are underway to manufacture new models.
Soleimani referred to the news about shutting down some plants outside the country and pointed out that IKCO has made detailed plans not to close any of its plants.
Giant carmaker Iran Khodro Company is suffering from a liquidity crisis and the Money and Credit Council has agreed to extend a 10-trillion-rial (about $1 billion) credit line to bailout the troubled firm.
According to a fax sent to Iran Daily, selling assets and offering stock exchange bonds are among other options that IKCO has decided to take as part of its recovery efforts.
IKCO stocks, the Middle East’s largest automaker, have lost their appeal in Tehran Stock Exchange.
Meanwhile, carmaker Saipa Group, with an 18 percent increase in sales last year is currently ranked first among its rivals.

Gasoline Imports Steady
August gasoline imports are expected to remain steady from shipments in the previous month, as Tehran builds inventories ahead of Ramadan.
Iran will import around 128,000 barrels per day of gasoline next month or about 15 cargoes, unchanged from July, traders said.
Iran, which bought 15 cargoes each of about 256,000 barrels for July, could purchase an additional two to three cargoes more for August if needed.
Gasoline consumption within Iran has risen about 6 percent per year, despite two years of rationing designed to keep consumption from rising, a top official from the National Iranian Oil Company said. Around 700,000 new cars are coming onto Iran’s roads each year.
Fuel demand in many countries is falling because of the global economic slowdown, but cheap gasoline means there is little incentive for Iranians to cut back on driving.
The United States’ likely sanction on gasoline exports to Iran has been designed to target the Iranian nation, a former Iranian MP said, stressing that the measure would prove futile, given Iran’s countermeasures, including its efforts to reach self-sufficiency in gasoline production. “While the US alleges to be an advocate of human rights, it has put sanctions on Iran’s gasoline supplies on its agenda in an effort to trample on the rights of the nation,“ former member of the Parliament’s National Security and Foreign Policy Commission, Elham Aminzadeh told Fars News Agency.
Aminzadeh said Iran is working on replacing its gasoline suppliers in a bid to defuse possible sanctions, and added, “As much as possible, the needed gasoline should be supplied domestically and any need to foreign supplies should be provided through imports from various world markets.“
She further reminded that western sanctions on Iran date back to 1982 and have been extended every year, and the fact that fresh sanctions are added to the previous ones shows they are ineffective.
A bill approved last week by the US Senate says companies that continue to sell gasoline and other refined oil products to Iran will be banned from receiving Energy Department contracts to deliver crude to the US Strategic Petroleum Reserve. The measure must now be reconciled with a similar bill passed by the House of Representatives.
In June, a committee in the US House of Representatives voted to target Iran’s gasoline imports and its domestic energy sector. Iran imports some 40 percent of its gasoline needs.
The House Appropriations Committee approved by voice vote a measure prohibiting the US Export-Import Bank from helping companies that export gasoline to Iran or support its production at home.

Energy Shares Up for Grabs
Tehran plans to offer a stake in state-owned companies, including the National Iranian Gas Company, as part of a sweeping privatization effort.
The government said it would press ahead with its privatization efforts following the Wednesday inauguration, Presstv wrote.
Iran took state control over most of the economy following the revolution in 1979. In the wake of the Iran-Iraq war, however, the government moved to privatize various market sectors in an effort to stimulate the economy.
Iran amended its Constitution in 2004 to push toward privatization, and in 2008 Leader Ayatollah Seyyed Ali Khamenei called on the government to hasten those efforts.
Ahmadinejad administration said it would offer 40 percent of the government shares in 14 state-owned companies on the Tehran Stock Exchange.
Among the companies are the National Iranian Gas Company, the Iranian Oil Terminals Company and the National Iranian Oil Products Distribution Company. A 10-percent stake in a number of oil refineries are also up for sale.

Dairy Exports Up
Exports of dairy products have gone up significantly over the past four years, said an official of the Trade Promotion Organization of Iran.
Dairy export increased from $18.6 million in 2005 to $124.4 million in 2008, Kioumars Fathollah Kermanshahi told Moj News Agency.
Milk, yoghurt, butter and cream are among the major exported products.
During March 21-April 21, the country exported $15.515 million of cheese powder, butter, planed cheese, melted cheese, milk, thickened milk, cream and yoghurt to Azerbaijan, Germany, Austria, Jordan, Armenia, Afghanistan, United Arab Emirates, Indonesia, Britain, Bahrain, Pakistan, Tajikistan, Turkmenistan, Syria, Denmark, Romania, Iraq, Saudi Arabia, Philippines, Kyrgyzstan and Oman.

Credit Council Spokesman
Head of Central Bank of Iran Mahmoud Bahmani has been chosen as the spokesman of Money and Credit Council.

SP Tower Construction
Azarab Company has begun construction of 46 towers for South Pars phases 15 and 16 in Assalouyeh, Bushehr province.

BMW, Toyota Lift Industry Spirits
The world’s top carmaker Toyota posted improved results, BMW returned to profit and Germany reported surging car sales, further signs that the troubled industry may have turned a corner.
The day after US giant Ford recorded its first increase in sales for almost two years, BMW said it had made a net profit of 121 million euros in the three months from April to June, well above forecasts.
According to AFP, Germany’s auto industry federation VDA said new car registrations in Germany have jumped by 27 percent this year compared to 2008, although the rise was mainly due to a government bonus scheme and car exports were down 12 percent.
Japan’s Toyota Motor also confounded predictions by logging a net loss of 77.8 billion yen ($817 million) for the April-June quarter, leaving it still deep in the red but much better than forecasts of a 200 billion yen loss.
Neither BMW nor Toyota said that the results indicated the auto industry was out of the woods, but they sounded cautiously optimistic.

No Quick End to China Stimulus
China will stick to its loose fiscal policy for at least three years despite a growing budget deficit, a government economist said in comments published on Wednesday.
“Even by conservative estimates, the timeframe for this round of proactive fiscal policy should cover at least three years,“ Gao Peiyong, a researcher with the Chinese Academy of Social Sciences, wrote in the People’s Daily.
Gao said China’s economic recovery was not yet on a solid footing, so an early end to the stimulus now coming from tax cuts and massive fiscal spending could lead to a new downturn.
“It is both necessary and urgent to seek stable economic development at the cost of fiscal imbalance,“ Gao said.
“It is inevitable that China’s fiscal situation will run into difficulties in the not-too-distant future.“
Beijing wants to keep its budget deficit to within 3 percent of GDP this year, a target that economists say will be tough to hit given current spending and revenue trends. The deficit in 2008 was about 0.5 percent of GDP.
China is executing a $586 billion stimulus package, announced last November, to help the world’s third-largest economy overcome the global economic slump.

Deutsche Boerse Profits Drop
German stock market operator Deutsche Boerse said its second-quarter profit fell by 34 percent owing to lower trading volumes and higher costs amid the financial crisis.
Deutsche Boerse posted a net profit of 164.9 million euros as the financial crisis cut into its core business. The result was well below an average analyst forecast compiled by Dow Jones Newswires of a 27-percent drop to 181 million euros.
“Persisting uncertainty in the financial markets and the resulting reluctance shown by market participants had a negative effect on trading volumes,“ a company statement said.
Sales fell by 12 percent to 515.6 million euros, it added, while total costs increased to 322.5 million euros from 297 million in the second quarter of 2008, in part owing to plans to move to a Frankfurt suburb.
The market operator recorded net interest income of 25.9 million euros, a 56-percent drop that marked the effect of historically low short-term interest rates on its Clearstream clearing and settlements unit.
However, emerging markets bank Standard Chartered of England posted record first-half profits and launched plans to raise extra cash from shareholders to fund ambitious growth in Asia, Africa and the Middle East.
The news comes one day after British banking peers Barclays and HSBC posted combined first-half net profits of $6.55 billion but also revealed rocketing bad debts in the first six months of the year.
All three banks have avoided state control unlike rivals which fell victim to the global financial crisis and subsequent international lending squeeze.

Britain to Replace Flights With Rail
Britain is aiming to replace short-haul flights with high-speed rail travel in a plan that is well advanced, the transport minister said on Wednesday.
Transport Secretary Andrew Adonis told the Guardian newspaper that plans for a route from London to Britain’s second largest city Birmingham would be published by the end of the year.
The route, estimated to cost 8.2 billion euros could be funded with a public-private partnership. Under the ambitious plan, a north-south line could be extended to Scotland, while some high-speed trains could be run on existing networks, the newspaper said.
Adonis said he would also like to see some short-haul flights between Britain and Europe progressively replaced by an ultra-fast rail network.