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Overview: Iran Analysis Weekly Report Oct 02, 2016

Oct, 2016

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Supreme Leader Ayatollah Ali Khamenei advised former hardline President Mahmoud Ahmadinejad against running in the 2017 presidential elections. Mr. Khamenei confirmed rumors that he had recommended former hardline President Mahmoud Ahmadinejad not to seek a third term in the May 2017 presidential elections. Ayatollah Khamenei explained that Ahmadinejad’s candidacy “would polarize the country.” He did not mention Ahmadinejad by name, but Iranian media and conservative figures immediately interpreted Khamenei’s comments as referring to Ahmadinejad. Ahmadinejad served as president from 2005-2013 and won his second term in the disputed 2009 presidential elections. He later fell out with the Supreme Leader after publicly challenging Khamenei’s authority. Past Iranian presidents have also ended their terms with tense relationships with the Supreme Leader, who holds ultimate authority in the Iranian political system.

Following the Supreme Leader’s statement, Mahmoud Ahmadinejad wrote that he will not run in the upcoming presidential elections in a letter to Supreme Leader Ayatollah Ali Khamenei on September 27. Ahmadinejad wrote, “Keeping with the will of the leader of the great revolution, I have no plans to be present in the presidential competitions next year.” Khamenei recently stated that he advised Ahmadinejad not to run in the elections.

On the foreign affairs note, Atomic Energy Organization of Iran (AEOI) Head Ali Akbar Salehi denied that a victory by Republican nominee Donald Trump in the presidential elections would threaten the nuclear agreement. Salehi stated, “I do not believe that Trump can have a great effect on the JCPOA [Joint Comprehensive Plan of Action]. It may go up and down a little bit, or some matters may get delayed, but he cannot seriously damage the agreement.” Trump has alternatively vowed to renegotiate and keep the JCPOA. Salehi’s remarks appear to qualify his own comments from earlier in September, when he warned that the U.S. presidential elections could bring “difficult days” for the nuclear deal. Salehi’s new comments align more closely with those of President Hassan Rouhani, who has asserted that no single politician can undo the deal.

On the economy note, Oil Minister Bijan Zanganeh praised OPEC’s agreement to curb oil production as an “exceptional decision.” Zanganeh claimed that OPEC members agreed to cut “around 700,000 barrels per day” from OPEC’s collective oil output during talks on September 28 in Algeria. The preliminary agreement, however, did not include specific production quotas for member states. The lack of details in the agreement has raised questions over its viability. Zanganeh told reporters that a special committee will be established to propose individual production quotas, which will then be debated during a formal OPEC meeting in November. Reports indicate that Iran will be exempted from the proposed cutbacks.

President Hassan Rouhani defended his administration’s economic performance during remarks on September 26. Rouhani stated, “At the start of my administration, we had an annual inflation rate of more than 40 percent. Today we have reached around 8.5 percent… My administration’s plan was to reach single-digit inflation, and today we have reached single-digit inflation. We are striving to preserve that.” The Central Bank of Iran also announced on September 26 that the inflation rate has fallen to 8.8 percent in the past 12-month period. Rouhani’s economic performance will be a critical component of his re-election campaign.

Ali Tayyebnia argued that compliance with the Financial Action Task Force (FATF) regulations is in Iran’s interest during remarks before Parliament on September 27. He stated, “Iran was placed unjustly on the blacklist alongside North Korea. It has created financial restrictions for banks and financial institutions.” Tayyebnia also outlined three conditions for Iran to implement the FATF’s regulations. He stated, “We will not allow any intelligence sharing. We will not accept any definitions or examples of terrorist groups from any authority except the UN Security Council. And we will not recognize unjust and unfair sanctions imposed by international authorities on entities on Iranian soil in any way.”

The Central Bank of Iran (CBI) announced last Monday that the inflation rate reached 8.8 percent in the 12-month period leading to the Iranian calendar month of Shahrivar (ended September 21). On Aug 22, Vice President and Head of Plan and Budget Organization Mohammad Baqer Nobakht said the annual inflation by August stood at 8.7 percent down by 0.3 percent compared to the annual inflation ending one month earlier. The year-over-year inflation rate has increased by 0.1% to 9.5% over the same period.

The Islamic Republic of Iran’s Customs Administration (IRCA) released its initial six-month report on the non-oil trade balance. Iran’s non-oil exports in this period have increased by almost 6% since last year to USD 21.7 billion, while imports have dropped by 2.6% to USD 20.3 billion. A previous report in August 2016 showed a USD 2.3 billion surplus, but this has already declined by 39% to USD 1.4 billion.

Tehran Stock Exchange's benchmark index, TEDPIX, gained 849 points or 1.1% during the trading week that ended September 28 to close at 77,300. Over 4.2 billion shares valued at $297.8 million were traded in 342,000 transactions during the week. The number of traded shares and weekly trade value grew by 43% and 9% respectively compared to the previous week.

The official rate of the US Dollar continued its rise at 0.2% and was quoted at IRR 31,460 by the Central Bank of Iran. The free market rate of the USDIRR increased by 0.5% to 35,830.

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