On April 13, 2016, His Excellency Mr. Hamid Moayyer, Iranian Ambassador to Bucharest, delivered a lecture part of the "IRSEA Distinguished Speakers" series to the postgraduate students of the Bucharest University of Economic Studies. In his lecture, themed "A Short Glance at the Economic Situation of the Islamic Republic of Iran", H.E. Ambassador Moayyer presented insightful elements of the economy and politics of Iran, as well as essential considerations regarding of Iranian-Romanian relations.
A Short Glance at the Economic Situation of the Islamic Republic of Iran
Mr. Gheorghe Hurduzeu, Dean of the Faculty for Economic International Relations,
Ladies and Gentlemen,
First, I have to express my appreciation to the organizers, especially the Dean of Economic International Relations of ASE University, for arranging this event. I must mention that lifting Iran economic sanctions not only opens the door of unrivalled economic opportunities to the world, but also provides a unique chance to combat the economic challenges of the region and the world, which in turn, reduces the political and social tensions.
Iran’s economic growth, with its population of 80 million, big and intact market, various profound resources, educated and suitable labor force, geographical and climatic diversity, closeness to 300-million market of Caspian Sea countries, appropriate infrastructures as well as desire and willingness for growth and dynamism, determination to create trade and manufacturing networks and clusters and efforts to find a place in the global supply chain of goods and services, along with employing foreign capital, will not only result in the prosperity of Islamic Republic of Iran and its investment and trade partners but also help return of stability and peace to the turbulent Middle East region, through deeper and wider links which in turn lead to job creation, poverty alleviation and prosperity.
The great success of Iran’s Government in diplomacy and its spillovers to the economy, including sharp fall of inflation from 45 to around 13 percent in the course of two years and under the most severe embargos, was widely welcomed and could resume trust and confidence of international investors to enter Iran’s market. Iran’s approach to long-term bilateral and multilateral cooperation and emphasize on the quality of investments reinforces this trust and confidence.
In this regard, the country of Romania, which in the eyes of the Iranians has always been associated with high-quality and trustworthy products will have a considerable chance to enter Iranian market and establish and renew the long-run partnerships.
Ladies and Gentlemen,
Now, after the decade-long unjust sanctions, the combination of the demography, unused capacities and profound natural endowments, among many others, sets the stage for a big economic leap.
Indicators such as: a territory of 1,648,195 square kilometers, and a large market of 80 million people, that is the second largest population of the Middle East, which is mainly young population with a high percentage of university education, and whose neighbors are land-locked countries that may need to produce or consume; rich energy and mineral resources, various industries such as oil and gas, refinery, petrochemicals and a long range of infrastructures: road, railway, air transport and their relevant industries, construction and development of airports, small and medium industries; these are some of the details of Iran’s economy.
In addition to the resources and the potential, from the geographical point of view, Iran is located in one of the world’s most sensitive geo-economic areas. In terms of natural resources, Iran has the world’s fourth largest known oil reserves, and the world’s second largest natural gas reserves. Also, Iran has the first global rank in zinc resources, second global rank in the copper field, ninth global rank in iron mines, tenth global rank in uranium mines, and eleventh global rank in plumb mines. In other words, Iran has 1% of the world’s population, but more than 7% of the world’s resources. In the field of basic industrial products such as cement and steel, Iran has a very good global rank. The cement production capacity in 2015 was approximately 78 million tons, and the steel production capacity was approximately 40 million tons. The Islamic Republic of Iran, in addition to its capabilities in the oil and natural gas field, as well as the possibilities of connection and transportation, has also capabilities in the fields of science, industry, aerospace, nanotechnology, medicine, energy, construction of dams, power plants, and agriculture, are the opportunities available to Romanian investors and entrepreneurs.
We’ve started a tireless effort to streamline and ease doing business and are removing many barriers to investment and trade. Now collaboration among the relevant decision-making authorities and stakeholders helps achieve that goal. The “Law on removing Barriers to Production”, ratified last year, aims to create a domestic competitive environment for production in a way that the decisions are made based on economic concepts and market rules. The macroeconomic policies, known as “the Resilient Economy Policies” which were notified last year by the Supreme Leader, are centering on enhancing productivity and effective international cooperation, high-quality, stable and sustainable domestic products and investments, improving productivity and reducing red tapes which paint a bright picture for foreign investors especially the Romanian practitioners.
The Islamic Republic of Iran’s Foreign Investment Promotion and Protection Act, known as FIPPA, offers extensive support to the foreign investors in Iran, whom are granted the same rights as the Iranian citizens, such as:
- Guaranteed compensation payment in case of nationalization and expropriation;
- Guaranteed payment of damages due to laws or government regulations;
- Guaranteed free transfer of foreign currency;
- Possibility of one hundred per cent foreign investment in investment plans;
- Possibility of land ownership in the name of the company registered in Iran;
- Providing facilities and issuance of residence permit for three years in Iran for foreign investors, managers, experts and their first degree relatives, and the possibility of visa renewals.
- Foreign investments in the free and special economic zones of the Islamic Republic of Iran are exempt from taxation for a period of 20 years.
Drawing on our experience, our main criteria for investments, either foreign or domestic, are quality and productivity, while having access to foreign capital merely based on financial terms and conditions such as interest rates, which target short-run horizon, is not the benchmark any further.
Ladies and Gentlemen,
Looking from a different view, the economy of the Islamic Republic of Iran has significant importance as below:
Nowadays, the externalities spread to the farthest regions. A visible example is the climate change. Unfortunately, the chaos and turbulence in the Middle East region, in Syria, Iraq, Palestine, Yemen and Afghanistan, is claiming lives of innocent civilians, devastates infrastructures, squanders resources and leaves long-lasting harmful impacts on the people of these regions and the globe. We should always remain concerned when our neighbor’s home is on fire. Just now, some of the negative consequences of insecurities have spread to other parts of the world especially in Europe, so immediate action is needed to curb the harm. A big portion of these problems stems from weak economic conditions, so a strong economic driving engine in the region shall boost these weak economies and help them out of this turmoil.
Islamic Republic of Iran through its development assistance to Afghanistan and the active role of Iranian firms in Iraq, has showed that considers economic and social security of the region and that of the world as intermingled, and has the potential to play a crucial role in boosting the regional and global economic conditions. Now that the sanctions have been relaxed, the world economy can benefit from the potentials in Iran’s economy.
The Geographic location of Iran puts it in the cross-roads of east-west and north-south. Expanding Iran’s road, rail and air fleets and improving transportation terminals, stations and ports, require huge investments which in turn earn substantial revenues. The networks provide secure and cheap connecting facilities for the CIS countries, Russia and Afghanistan to trade through open waters of Persian Gulf in the South of Iran.
There is great appetite in Iran’s market for low-consuming, high-standard cars and motorcycles, power plants (particularly renewable energy), improving agricultural processing and production (in particular greenhouse production), packaging and many others which can be implemented by the Romanian investors.
The growing number of tourists and connecting flights through Iran is another evidence of profitable investments in air transportation and its relevant facilities. Increase of domestic needs and expansion of regional trade highlights the importance of rail and road transportation. Just now, developments of rail and road transportation, and the facilities which require huge investments, are on top of the agenda of the government.
Services can be the other sector for cooperation. It is foreseeable that financial transactions of Iranian banks take a leap. This needs infrastructures and arrangements with international banking system. Regarding insurance, just draw your attention to the size of Iranian Oil Tanker Company which stands the 11th in the world and its insurance premium make a very big amount. Since Iran is having a bank-based economy, there is need to enhance and expand the capital market and introduce new instruments to meet the long-term needs of the companies. Romanian firms and institutions can help in these fields as well.
Ladies and Gentlemen,
Let me give you factual information on the status of energy in Iran. As I mentioned above, my country is also unique having almost all sources of energy, fossil fuels mainly oil and gas, great potential of renewable energy especially wind and solar and nuclear power plant, based on its diversified energy policy.
Iran holds the world's fourth-largest proved crude oil reserves and the world's second-largest natural gas reserves and totally, the first oil and gas reserves in the world. Iran holds almost 10 percent of the world's crude oil reserves and 13 percent of OPEC reserves. About 70% of Iran's crude oil reserves are located onshore, with the remainder mostly located offshore in the Persian Gulf. Iran also holds proved reserves in the Caspian Sea, although exploration has been at a standstill.
Islamic Republic of Iran also ranks among the world's top 10 oil producers and top 5 natural gas producers. Iran produced almost 3.6 million barrels per day of which 3 barrels per day was crude oil and the remainder was condensate and natural gas plant liquids and an estimated 5.7 trillion cubic feet of dry natural gas in 2015.
The state-owned National Iranian Oil Company (NIOC) is responsible for all upstream oil and natural gas projects. The Iranian constitution prohibits foreign or private ownership of natural resources, but the international oil companies (IOCs) can participate in the exploration and development phases through new Iranian Petroleum Contract called as IPC. In this context, Iran is planning to change its oil contract model to allow IOCs to participate in all phases of an upstream project, including production as product sharing model and downstream. These types of contracts in oil and gas industry will be long-term and the expenses of the foreign investor in the projects will be revised annually for securing the benefit of the investors. These projects including 55 projects with the value of one hundred billion Dollars in oil and gas upstream industry and 70 billion Dollars in petrochemical industry;
So, the huge opportunities are available to foreign investors in upstream and downstream sectors, in petrochemicals and refineries. Unfortunately the energy intensity in Iran is very high which reflects inefficient energy consumption in industry and agriculture, by cars and households. This waste of energy has many negative externalities: air, soil and water pollution, heart diseases and so on.
Based on the large-scale plans, the dependence of annual budget on oil revenues should terminate in near future, so we should move from selling crude oil towards value added products, hence there is need to boost production of petrochemicals and improve our refineries to produce high-quality exportable products and finding an appropriate position in the global value chain.
I am sure you know about the progress Iran has made in peaceful nuclear energy, in nuclear medicine, nuclear agriculture and nuclear power plants. We would like to benefit from your knowledge, in conformity with the IAEA regulations, to expand our knowledge in the above-mentioned area and enhance security and safety of our nuclear facilities.
During the brutal sanctions, the young Iranian scientists could take big steps forward in nanotechnology. This is a new field in the world and concerning the types of expertise and the people involved, I believe both countries will deeply benefit from mutual cooperation.
I conclude by highlighting the determination of the Government of the Islamic Republic of Iran on downsizing the government and enhancing private sector. The government encourages private sectors of the two countries to have face to face talks to help expand the non-public economy and assist the government to delegate the non-sovereign activities.
As you may be aware, the most important project between the Islamic Republic of Iran and EU, especially Romania, in long-term period is participating to the natural security to diversify the source of natural gas of the European Union. The other bilateral projects between two countries will be as follows:
- Crude oil and oil derivatives export to Romania (as you may be aware the first shipment of 1 million barrels crude oil will be soon delivered to Romania Lukoil Company);
- Oil and Gas Industries Equipment Trade;
- Petrochemical Products Trade;
- Direct or Joint Investment in energy sectors of two countries.
Finally, I must mention that the Islamic Republic of Iran and the European Union have many capabilities to develop economic and commercial cooperation. These capabilities, due to political considerations, have remained unused. Both Islamic Republic of Iran and European countries can use these economical capabilities for developing bilateral relations. The European countries have been for years some of the major trading partners of the Islamic Republic of Iran, and this potential still exists and it is reversible. According to Eurostat Statistics in 2016, the total volume of trade between Iran and EU was the equivalent of 7.7 billion Euros in 2015, with an increase of approximately 25% rather than 2014 which it was around 6.2 billion Euros. In 2015, The EU exports to Iran reaching 6.4 billion Euros, while the EU imports from Iran reached 1.3 billion Euros.
Thank you for your attention and I wish you all the best.