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CBI has over €70bn in hard currency reserves
Trump administration. The move banned open market trading of foreign exchange and made unofficial rates illegal.
In early May, a World Gold Council report said that gold coin and bar demand in Iran shot up to a three-year high of 9.3 tonnes in the first quarter as Iranians —correctly—anticipated that the consequences of deteriorating relations with the US would cause Tehran to introduce currency controls.
The Azadi gold coin, the former number one sovereign sold by the Central Bank of Iran (CBI), also reached a historic high on June 18, topping IRR24mn a coin, while smaller half-sovereigns increased in price accordingly.
According to the IMF in its Regional Economic Outlook on May 4, the value of Iran’s gross official reserves was estimated to reach $108.4bn in 2018. The country’s gross official reserves will experience a $13.3bn jump in the current year rising from last year’s $95.1bn.
The Central Bank of Iran (CBI) has more than €70bn in hard currency reserves, according to the National Development Fund of Iran (NDFI). However, as restrictions continue on trade and withdrawal of cash from forex reserves, the country is looking for ways to find new revenues of hard currency.
5.2 FTA, multilateral agreements
Iran’s PTA with EEU member countries commences
October 27 saw the commencement of a temporary preferential trade agreement (PTA) between the Moscow-led Eurasian Economic Union (EEU) and Iran, with more than 862 items seeing a significant tariff change, with many tariffs reduced to zero.
The agreement between Iran and the EEU—which groups Russia, Kazakhstan, Armenia, Belarus and Kyrgyzstan—initiates a PTA that is the first such economic agreement signed by the Islamic Republic since it was founded in 1979. Items covered by the deal include everything from fish to seeds to metals and even food items like waffles.
However, despite the large fanfare protectionism is alive and well on both sides. Iran throttles imports of rice from EEU states during the summer months, for instance. The country is hugely protectionist towards its northern rice production. Any hint of competition to the limited production of rice in Iran would be seen as negative for the Rouhani administration.
Iran specifically bans the import of “semi-milled or wholly milled rice, whether or not polished or grazed” from July 23 to October 23 annually. However, during periods when it is not banned, there will be a PTA reduction of 42% on imports from the EEU to Iran. It remains to be seen how this limited import agreement will work in practice.
The PTA will also apply to buckwheat consignments sent to Iran, with the tariff falling from 40% to 6% and “crude oil, whether or not degummed”, with a decrease to 10% from 40%. Imported chewing gum, meanwhile, gets a cut that takes the tariff from 82% to 10%. For waffles and wafers the reduction is from 63.6% to 20%. Pasta items under “other pasta” are pegged to a 20% tariff.
Cosmetics also play a part in the broader change in tariffs including shampoos,
21 IRAN Country Report February 2020 www.intellinews.com
