Sanctions against Irans petrol imports could be
a blessing in disguise, the countrys Central
Bank governor, Mahmoud Bahmani, said yesterday.
Penalizing companies that sell Iran petrol is being
considered in the US and Europe as an option should talks over
Irans nuclear programme fail. When nations are
subject to sanctions, they innovate, said Bahmani, in an
interview with Emerging Markets in Istanbul.
Iran has been trying for several years to reduce consumption
of petrol which sells cheaply due to subsidies and
to increase refining capacity.
Some reports have suggested that petrol imports, which come
mainly through the UAE, have halved since rationing was
introduced in 2007, when imports were 40% of consumption. Using
a smart card, motorists buy a quota at around $0.10 a litre,
and can buy more at a higher price.
Advocates of further sanctions argue they would spark
discontent and increase pressure on the authorities to curb the
But Bahmani argued that while punitive measures imposed
a price, the countrys vulnerability was low.
Foreign reserves were at levels unprecedented for half a
century, he said.
As is Irans practice, he declined to reveal figures,
and he was also unwilling to disclose the size of the Oil
Stabilisation Fund (OSF), which collects windfall oil earnings
for investment and contingencies.
Because of the current international situation, we
prefer not to [disclose this] anymore, he said. At
present, we are facing some threats. Naturally, we have to
equip ourselves to face them.
The Economist Intelligence Unit estimates foreign reserves
at US$81.1 billion, down from US$96.3 billion in 2008. An
Iranian parliamentary report put the OSF in March at $25
billion in March.
Bahmani said Iran held very little of its
reserves in dollars and was steering clear of the
greenback in its oil sales.
Iranian banks stopped issuing letters of credit in dollars
in 2007 as the US tightened unilateral banking sanctions, and
the Central Bank reported in August 2007 that Iran was
receiving 70% of oil revenue in currencies other than the
As well as coping with US and UN sanctions, the Central Bank
has faced since 2005 a government, under president Mahmoud
Ahmadinejad, that has favoured expansionary fiscal policies and
bank lending rates at or below inflation.
Bahmanis two immediate predecessors, Ebrahim Sheibany
and Tahmasb Mazaheri, left in quick succession in 2007 and 2008
after differences with Ahmadinejad.
But Bahmani, who took over in September 2008, has revived
the Monetary and Credit council, which met in July around two
years after it was reportedly abolished by Ahmadinejad.
Bahmani described the two years as a number of
meetings held in different venues rather than as
suggested in some media reports the councils
decision-making powers, including over lending rates, being
exercised by the presidents office.
The governor stressed his co-operation with Ahmadinejad and
his own attendance at cabinet meetings. Its
interesting that our close working relationship has led to my
having a free hand with independent decisions, he noted.
Decisions are fully based on [technical] expertise and
Bahmani said monetary policy had now fully
contained liquidity growth, meaning point-to-point
inflation had fallen to 13.1% in September from 29.5% in
September 2008. We can now envisage achieving
single-digit inflation, he added.
President Ahmadinejads critics argue his spending
policies have diverted resources away from investment needed to
stimulate employment, so compounding effects of the global
economic crisis and falling oil prices.
Hence the recent IMF World Economic Outlook projected
Irans growth at 1.5% for 2009 and 2.2% for 2010, down
from 7.8% in 2007 and an average 5.4% from 1996 to 2006.
Bahmani stressed the global crisis had been triggered
in the developed countries, which had behaved in an
ignorant manner over risk management.