Overview: Iran Analysis Weekly Report Jan 10, 2016
11 Jan, 2016
Vistar Business Monitor
Supreme Leader Ayatollah Ali Khamenei warned of “divine retribution” against Saudi politicians following the execution of prominent Shia cleric Sheikh Nimr al Nimr.
Saudi Arabia executed al Nimr and 46 other prisoners on January 2, prompting attacks by Iranian protesters on the Saudi embassy in Tehran and consulate in Mashhad. Saudi Arabia subsequently severed diplomatic relations with Iran. Mr. Khamenei warned Saudi politicians that they will face “divine retribution” for the execution, while the attacks prompted strong criticism from President Hassan Rouhani, who criticized them as “unjustifiable” and “damaging” to Iran’s reputation. The United Arab Emirates, Bahrain, and Sudan each downgraded or severed diplomatic relations with Iran as well.
The U.S. response to the Saudi execution of a Shia cleric and others was predictably muted since it is loath to further damage already strained relations with Saudi Arabia, the long-standing oil-rich pillar of its Mideast policy, even though the Sunni kingdom wants to torpedo the Iran nuclear deal and its Wahhabist ideology inspires jihadism.
Saudi Arabia and Iran have been locked in mutual confrontation for decades in a conflict that is more about regional power than Shia or Sunni religious disputes.
The power struggle for the parliamentary and Assembly of Experts elections between the hardline conservatives and moderate/reformists continued last week as registration of candidates for both polls ended on December 25th. Now all eyes are on the Guardian Council for candidate screening.
Iran released footage of an IRGC underground ballistic missile depot, including images of Emad ballistic missiles, on January 5. The footage continues Iran’s defiant reaction to reports that the White House has begun preparing additional sanctions against Iran’s ballistic missile program.
On the economic side, the interbank interest rate continued the recent downward trend below 20%. Last week the Central Bank of Iran reported the year-on-year inflation rate at 9.4%, which indicated another monthly drop. As a result, the authorities of the CBI also announced this week that the organization will lower the interest rates by nondirective means soon.
With Iran’s crude oil being traded at $29, Iran’s revenue from oil sales have decreased to 31 trillion rials. The revenue is too low to cover government expenditures, given the fact that authorities should spend 34 trillion rials on cash subsidies and 100 trillion rials on the salaries of millions of employees.
The oil industry will likely continue to suffer in 2016. The first trading week of 2016 was dominated by negative sentiment, mostly surrounding the stock market instability in China.
WTI and Brent slumped below $34 per barrel to close out the week, the lowest level in 12 years. The prices are so low that a growing number of oil producers will not even be able to turn a profit even at existing projects.
To subscribe please visit http://vistarbm.com/Subscribe.aspx.