Iran’s finance minister trumpets surge in investment from Russia

Russia has turn out to be the biggest overseas investor in Iran over the previous yr, in response to Iranian officers, as the 2 closely sanctioned nations have stepped up co-operation since Russian forces invaded Ukraine.

Ehsan Khandouzi, Iran’s finance minister, stated Russia had invested $2.76bn within the nation throughout the present monetary yr that ended this week, citing tasks within the industrial, mining and transport sectors.

“We outline our relationships with Russia as strategic and we’re working collectively in lots of elements, particularly financial relations,” Khandouzi informed the Monetary Instances. “China and Russia are our two foremost financial companions [and] Iran goes to increase its relations with them by way of implementing strategic agreements.”

His feedback underscore how Tehran and Moscow have ramped up their ties because the west imposed waves of sanctions on Russia after President Vladimir Putin’s invasion of Ukraine a yr in the past.

Russian enterprise delegations have visited the Islamic republic in search of offers and tips about how one can keep away from sanctions, whereas Iran has been eager to develop new commerce relationships to bolster its personal sanctioned economic system.

The US and Europe have accused Tehran of promoting armed drones to Moscow which have been deployed towards Ukrainian targets. Iran denies its drones are used within the battle. Khandouzi stated the Ukraine battle was “unlucky” for Iran, however didn’t reply when requested if Tehran obtained revenues from arms gross sales to Russia.

The Iranian and Russian central banks signed a deal in January to hyperlink their interbank communication programs in a bid to spice up bilateral commerce. “Russia and another international locations are eager to make use of mechanisms corresponding to mutual financial agreements or trade-based swaps. We’ve negotiated not solely with Russia but in addition with China and different companions, together with Turkey, on this regard,” Khandouzi stated. “Technically talking, this monetary community is in a greater state of affairs between Iran and Russia than others.”

Analysts are sceptical about how far the 2 can develop commerce as each have commodity-based economies producing related merchandise. However a western diplomat stated the worry was that “it’s a dynamic that may turn out to be self-sustained”.

Iran has endured a long time of sanctions, and has been lower off from the worldwide monetary system since former US president Donald Trump withdrew from the 2015 nuclear accord and launched new curbs towards the republic.

This has additional stymied Tehran’s capacity to draw overseas funding — the second-largest overseas funding after Russia was from neighbouring Afghanistan, with £256mn. Chinese language funding was simply $131mn, behind Iraq and the United Arab Emirates, underscoring how it’s not simply western corporations which are being delay doing enterprise in Iran.

Russia accounted for two-thirds of the entire overseas direct funding of about $4.2bn in Iran this monetary yr, in response to finance ministry information. Iran attracted FDI of simply $1.45bn in 2021, in response to UN commerce information.

President Ebrahim Raisi’s hardline authorities has prioritised creating regional and Asian commerce relationships since taking workplace in 2021 in an effort to counter the influence of sanctions. A Chinese language-brokered deal signed this month will restore diplomatic ties between Iran and rival Saudi Arabia, seven years after they severed relations.

Khandouzi stated Iran had final month achieved its highest stage of oil exports for not less than two years, overtaking the earlier excessive of 1.3mn barrels a day, regardless of US sanctions.

He stated non-oil exports of $53bn had been additionally 12 per cent increased within the first 11 months of this yr than the identical interval the earlier yr. Imports over the identical interval had been $60bn, which mixed with the export information confirmed “Iran’s economic system can’t be remoted”, he added.

But the federal government has struggled to include the financial malaise that has gripped the republic, with inflation hovering increased than 47 per cent and the rial down 60 per cent below Raisi’s watch. Iranian economists blame the authorities for fuelling inflation by excessively printing cash.

Tehran in December changed the central financial institution governor who had been within the submit for simply 15 months because the nationwide foreign money slid to report lows towards the US greenback, whereas the regime battled months-long nationwide protests.

Khandouzi defended the federal government’s report and stated it deliberate to reform the central financial institution, which might be “held accountable to fulfill the inflation targets”. It could even be given the “essential authority to manage the procedures which create cash provide,” he stated.

“We additionally managed to lower the cash provide progress fee, which was 39 per cent within the final Iranian yr. By the top of this monetary yr, it’s projected to be 30 per cent,” he added. “We’re decided to lower the inflation fee.”

Khandouzi stated the federal government had boosted tax assortment and clamped down on evasion to extend non-oil income, whereas on the similar time lowering company tax by 5 share factors.

But the federal government’s greatest problem is easing the financial stress on unusual Iranians, with analysts warning that financial grievances are a ticking bomb amid widespread public anger with the regime.

“When the nation is fighting financial issues, officers undoubtedly make extra efforts than earlier than and spend extra time serving individuals,” Khandouzi stated.