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Islamic principles, such as a ban on interest payments.
The capital market regulator, the Securities and Exchange Organisation (SEO), reportedly said it had started work on a new structure for Islamic bonds. The sukuk will use an agency format known as wakala, which is widely used in Asia and the Middle East but not yet offered in Iran, said Majid Pireh, senior Islamic finance expert in the SEO’s research, development and Islamic studies department.
“This will be a new financing instrument for companies,” Pireh was cited as saying, adding that regulations could be ready in six to nine months.
Wakala sukuk pay a variable rate, giving them equity-like features compared with other sukuk in Iran, which pay fixed rates.
The SEO also plans to introduce warrants—contracts giving the option to buy underlying shares at a later date—following the earlier introduction of put and call options. The SEO’s religious board is reviewing a proposal for warrants, which must be structured to obey Islam’s ban on pure monetary speculation. “The derivatives market has a lot of room to grow. Options were introduced in 2013, but the first trades were done in 2016,” Payam Afzali, managing partner and head of investment banking at Tehran-based Kian Capital Management, was quoted as saying.
Warrants may not attract major investment in the short term but could be used to make bonds and equities more appealing to investors, he added. Meanwhile, the SEO is considering whether to introduce insurance-linked securities so that domestic insurers can offload some portfolio risk in the capital markets, Pireh said.
LS are typically tied to natural catastrophes such as earthquakes and offer high yields; investors can lose their principal if a catastrophe loss is triggered. They could serve as an alternative to reinsurance cover, which is scarce as sanctions mean Iran is shut out of global reinsurance markets such as Lloyd’s of London.
9.0 Industry & Sectors 9.1 Sector news
9.1.1 Oil & gas sector news
Iran has discovered a new oil field containing reserves of “very light and sweet” crude near the southwestern city of Abadan, IRIB cited the country’s oil minister as saying on January 22.
The minister, Bijan Namdar Zanganeh, has previously pointed to how Iran can look forward to tapping as-yet-undiscovered oil and gas fields. That is partly because the country halted much of its hydrocarbon exploration activities following the 1979 Islamic Revolution. Iran has the world’s fourth largest oil reserves and second largest gas reserves.
The discovery was reportedly made on Minoo Island. Nearby Abadan is the century-old home of Iran’s original oil refineries created by British Petroleum (BP), previously known as the Anglo-Persian Oil Company (APOC). The site,
36 IRAN Country Report February 2019 www.intellinews.com