Page 4 - IRANRptNov18

1.0 Executive summary
Iran’s GDP grew 1.8% y/y in the first quarter of the Persian year (ended June 21), the Central Bank of Iran (CBI) said on September 16. Iranian economic growth is expected to move into negative territory in the second Persian quarter because the worst effects of the collapse of the Iranian rial (IRR) set in during that three-month period. The currency has lost more than 70% of its value over six months with the economic pressure generated by Washington’s reimposition of sanctions on Tehran taking a heavy toll.
The anemic growth rate seen in the first quarter stands in stark contrast to the figure recorded for the same period of the previous Persian year, namely 4.6%. The US is intent on throttling Iran’s economy to achieve its ends.
Since Donald Trump unilaterally withdrew the US from the multilateral pact in early May, Iran and the other signatories—the UK, France, Germany, Russia and China—have set out to salvage it. EU foreign policy chief Federica Mogherini said on September 27 that a so-called Special Purpose Vehicle (SPV) to facilitate trade with Iran that would be shielded from US secondary sanctions could be in place before November 4, Reuters reported.
The first set of US sanctions, which were introduced in early August , target Iran's auto industry, trade in gold and other precious metals, issuance of sovereign debt, purchases of US dollars and other global trade. The second set of heavy sanctions - set to take effect on November 5 - will be aimed at Iran's banking sector and oil industry, with Washington demanding that all countries stop importing Iranian crude oil. Oil export revenues are indispensable to Iran’s economy and Tehran has threatened to block the Strait of Hormuz in response to Trump’s move against its oil sales.
Iran’s currency, the Iranian rial (IRR) has lost around 70% of its value in the year to date and it is widely thought that there is roaring inflation which is not reflected by official data. Ahead of the upcoming energy sanctions, the IRR is again under pressure. By the close of trade on October 31, it fell 2.7% d/d to IRR152,500 against the dollar.
Some external reports claim inflation has risen past 200% and many big foreign companies that were present in Iran, including European enterprises, have made for the exit. Most would have been clearly exposed to US secondary sanctions if they had stayed given connections to US financial markets, including capital raising activities, and assets. For instance, the latest big names to state that they are suspending operations in Iran include French energy major Total, German auto giant Daimler, British Airways and Air France.
Iran retains firm hopes that at least China and India—the two biggest markets for its vital oil exports—will pay little heed to the US sanctions . T hough the other major power signatories to the deal still back the nuclear accord, noting that Iran has always remained in full compliance with it, they have so far done little to shield their companies from the penalties.
The big dilemma is that analysts doubt whether a payment mechanism as proposed by the remaining signatories is feasible given that the US could modify its sanctions to encompass any new system. The IMF estimated that
4 IRAN Country Report November 2018 www.intellinews.com