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Overview: Iran Analysis Weekly Report July 24, 2016

July, 2016

Vistar Business Monitor

Senior Iranian officials criticized the attempted coup against Turkish president Recep Tayyip Erdogan as undemocratic. Supreme National Security Council Secretary Ali Shamkhani noted that Iran opposes “any sort of coup in the country, either backed by domestic or foreign plotters.” Senior Foreign Policy Advisor to the Supreme Leader Ali Akbar Velayati promised that Iran’s “principles” as a nation would force it to “oppose this coup d’état or any other coups.” Judiciary Head Ayatollah Sadegh Amoli Larijani, however, used the coup as an opportunity to criticize Turkey’s support for opposition groups against Syrian President Bashar al Assad, whom Iran has been supporting. Larijani stated that Turkish officials are learning that “respecting the people’s vote is not specific to one country” and that their “confrontation with the legitimate and democratically elected government in Syria and support for terrorists was a mistake.”

Russia has delivered the “first shipment” of S-300 surface-to-air missiles to Iran. Tehran received several components of an S-300 system in April, including a deployable radar and command vehicle. Iran was receiving the PMU-2 version of the S-300. The PMU-2 version is significantly more advanced than the older PMU-1 version some assessed that Iran had purchased based upon the parts disclosed in April.

The Foreign Ministry issued its second quarterly report on the Joint Comprehensive Plan of Action (JCPOA) to Parliament’s National Security and Foreign Policy Commission. The report acknowledges that America’s post-JCPOA sanctions regime has created “a psychological effect and confusion for foreign firms” wanting to invest in Iran, although it also notes some successes with European banks. The report ultimately calls for patience, noting that “meeting many of the expectations of the nuclear deal requires more time.” The Foreign Ministry’s first report on the nuclear deal’s progress similarly cautioned against expecting quick benefits from sanctions relief.

The twelve-member Guardian Council re-elected hardline cleric Ayatollah Ahmad Jannati as its secretary general, a position he has held since 1992. Abbasali Kadkhodaei and Mohammad Reza Alizadeh were also elected as the Council’s spokesman and vice president, respectively. Jannati was also recently elected chairman of the Assembly of Experts, a group of clerics formally charged with selecting the next supreme leader.

The Assembly of Experts, a clerical group that will formally elect the next supreme leader, appointed members of its special commissions during a closed session on July 21. Assembly Chairman Ayatollah Ahmad Jannati will also chair the Constitutional Article 111 Commission, which covers circumstances in which the Assembly can theoretically remove a sitting supreme leader from office. Jannati is a hardline cleric.

On the economic note, the Iranian Parliament’s Planning and Budget Commission rejected the amendment to the 1395 Budget. The debts of the government to companies and contractors, most particularly banks, have locked a huge part of the liquidity. This has paved the way for a deep recession at present. It seems the government has lost all of its hopes to pay its debts. The clauses 19 and 20 of the budget bill of the year 1395 (March 21, 2016 – March 20, 2017) were among its most controversial parts. The clauses were left out of the bill, which were rejected at the parliament’s Economic Commission despite some amendments the government had recently introduced with the aim of getting them approved. This, it is far-fetched that the bill will be approved at the parliament’s floor.

On the foreign exchange front, the government made its last efforts to prepare the ground for creating a fixed foreign exchange rate in light of demand for foreign currency. Iran’s Deputy Minister of Industry has said each day the Central Bank receives a list of goods which should no longer be given the official foreign exchange rate. He added that the Ministry of Industry does not prioritize any group when it comes to allocation of the official FOREX rate. He also said now that the elimination of those receiving official foreign exchange is picking up steam, even importers are making no objections, and, for this reason, it seems that the government is implementing its policy in a proper way.

The Tehran Stock Exchange main index (TEPIX) advanced 1% last week to settle at 74,514 on Wednesday’s trading session. This came after the main index broke through the 74,820 resistance level – which created a sense of stability in the market. The positive performance of the TEPIX also came at a time that trading for the stocks of auto manufacturers and banks which always strongly affect the market had been halted.

Over the past week, there was no major fluctuation in the rates of the greenback compared to the week before. Nevertheless, it ended the Persian calendar month of Tir (21 June-July 2016) by registering an increase of 1.5 percent which was the highest growth in almost nine months. It appears that the US dollar is going to remain in the channel of IRR 35,000. Over the past months, the government intervened and supplied extra dollars to stabilize the prices when the hard currency had for the first time rose to the channel of IRR 35,000. Still, this stopped from early August when the dollar first entered the channel of IRR 35,000 and the prices accordingly proved to have already stabilized.

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