Volume IV - Annexes 121-204

IN THE NAME OF GOD
INTERNATIONAL COURT OF JUSTICE
CASE CONCERNING
ALLEGED VIOLATIONS OF THE 1955 TREATY OF AMITY,
ECONOMIC RELATIONS, AND CONSULAR RIGHTS
(ISLAMIC REPUBLIC OF IRAN V. UNITED STATES OF AMERICA)
ANNEXES TO THE MEMORIAL
OF THE ISLAMIC REPUBLIC OF IRAN
VOLUME IV
24 May 2019

TABLE OF CONTENT
PART VI – THE ADVERSE CONSEQUENCES OF THE U.S. MEASURES FOR THE IRANIAN
ECONOMY
6.1 Witness Statements
Annex 121 Witness statement by Mr M. Akhbari, Assistant Director of
the Economic Research and Policy Department of the Central
Bank of Iran, 16 February 2019
p. 1
Annex 122 Witness statement by Mr A. Jamali, President of the OIETAI,
26 March 2019
p. 13
6.2 Official and Academic Sources
Annex 123 Central Bank of Iran, “Selected Economic Indicators, Balance
of Payment”, Persian years 1394 (21 March 2015 – 19 March
2016), 1395 (20 March 2016 – 20 March 2017) and 1396
(21 March 2017 – 20 March 2018)
p. 19
Annex 124 Central Bank of Iran, “Selected Economic Indicators, Balance
of Payments”, Persian Month of Azar 1397 (22 November
2018 – 21 December 2018)
p. 43
Annex 125 McKinsey Global Institute, “Iran: the $1 Trillion Growth
Opportunity”, June 2016 (excerpts)
p. 47
Annex 126
Iranian Parliament, Sixth 5-Year Economic, Social, and
Cultural Development Plan Act of the Islamic Republic of
Iran (Persian years 1396-1400) (21 March 2017-20 March
2022), Articles 3 and 4
p. 55
Annex 127 World Bank Group, “Iran Economic Monitor – Sustaining
Growth: the Challenge of Job Creation”, 2017
p. 59
Annex 128 UNCTAD, “World Investment Report 2018 – Investment and
New Industrial Policies”, 2018 (excerpts)
p. 97
Annex 129
A. Sadeghi, “How Public Investment Could Help Strengthen
Iran’s Growth Potential: Issues and Options”, IMF Working
Paper, WP/18/129, 8 June 2018
p. 101
Annex 130 OHCHR, “Iran sanctions are unjust and harmful, says UN
expert warning against generalised economic war”,
22 August 2018
p. 129
Annex 131 OIETAI, “Report on a decrease in foreign investment due to
the re-imposition of the U.S. sanctions”, December 2018
p. 133
- i -

Annex 132
IMF, “World Economic Outlook: Challenges to Steady
Growth”, Oct. 2018 (excerpts)
p. 137
6.3 Other Sources
Annex 133 World Bank, “Q&A on the key economic impacts of Iran
deal”, 10 August 2015
p. 141
Annex 134
S. Mufson, “What ending sanctions on Iran will mean for the
country’s economy”, The Washington Post, 12 August 2015
p. 145
Annex 135 C. Lyttle, “FDI in Iran soars with sanctions relief”, Financial
Times, 20 June 2016
p. 151
Annex 136
“Iran without Sanctions: What has changed?”, Knowledge at
Wharton, 13 December 2016
p. 155
Annex 137
M. Schwartz, K. Reddy, Dr. R. Ghorashi, “The Effects of the
JCPOA on the Iranian Economy”, American Iranian Council,
17 April 2017
p. 165
Annex 138
N. Habibi, “The Iranian Economy Two Years after the
Nuclear Agreement”, Middle East Brief, February 2018, No.
115
p. 181
Annex 139
A. Paivar, “Nuclear Deal: Is Iran’s economy better off now?”,
BBC, 4 May 2018
p. 193
Annex 140
A. Fitch and I. Talley, “U.S. Companies Wind Down Iran
Business After Nuclear Deal Pullout”, The Wall Street
Journal, 5 June 2018
p. 201
Annex 141
E. Wald, “10 Companies Leaving Iran As Trump’s Sanctions
Close In”, Forbes, 6 June 2018
p. 207
Annex 142
S. Hanke, “Iran’s Rial Is In a Death Spiral, Again”, Forbes,
29 July 2018
p. 213
Annex 143
M. Milliken & P. Graff, “Trump says firms doing business in
Iran to be barred from U.S. as sanctions hit”, Reuters,
7 August 2018
p. 217
Annex 144
G. Golshiri, “En Iran, l’économie accuse le coup des sanctions
américaines”, Le Monde, 17 September 2018
p. 223
Annex 145
D. Bowman, “Dubai exports to Iran plummet”, Arabian
Business, 18 November 2018
p. 229
Annex 146
“Two More Income Brackets Dropped Below Poverty Line”,
Iran International, 19 November 2018
p. 233
Annex 147
“Live IRR exchange rates in Iran's free market”,
www.bonbast.com/historical/usd, 29 March 2019
p. 237
- ii -

Annex 148
“Euro to Rial rate 2018-01” and “Euro to Rial rate 2018-11”,
www.bonbast.com, 13 May 2019
p. 241
PART VII – CONSEQUENCES OF THE U.S. SANCTIONS ON THE FINANCIAL SECTOR
7.1 Witness Statements
Annex 149 Witness statement of Mr J. Mehdizadeh, Director of
Economic Research and Policy Department, Central Bank of
Iran, 21 August 2018
p. 249
Annex 150 Witness statement of Mr A. Laktabriz, Director General for
International Affairs, Central Bank of Iran, 8 April 2019
p. 255
Annex 151 Witness statement of Mr M. R. Hoseinzade, Chairman of the
Board and Managing Director, Bank Melli Iran, 1 May 2019
p. 291
Annex 152 Witness statement of Dr S. J. Mirghassemi, Director of Legal
Affairs, and Mr A. Esmaeilipour, Director of Marine
Department, Central Insurance of IR Iran, 1 May 2019
p. 295
7.2 Official and Academic Sources
Annex 153
IMF, “Belgium - Financial System Stability Assessment”,
IMF Country Report No. 18-67, 6 March 2018 (excerpts)
p. 311
Annex 154
French Senator P. Bonnecarrère, “Rapport d’information fait
au nom de la commission des affaires européennes sur
l’extraterritorialité des sanctions américaines”, French Senate,
4 October 2018 (excerpts)
p. 317
Annex 155
OberBank, “Business policy measures regarding Iran
business”, 2 January 2019
p. 321
7.3 Private Sources
Annex 156 Email of DZ Bank to its branches, 16 May 2018
p. 325
Annex 157 Email from BCP Bank to Export Development Bank of Iran
(EDBI), 16 May 2018
p. 333
Annex 158 Email from BCP Bank to Bank Pasargad Iran, 22 May 2018
p. 337
Annex 159
SWIFT message from PKO Bank to Bank Pasargad,
28 May 2018
p. 341
Annex 160 Letter from Raiffeisen Bank to Bank Melli, 29 May 2018
p. 345
Annex 161 Email from Danske Bank, 30 May 2018
p. 349
- iii -

Annex 162 Email from BCP bank to Export Development Bank of Iran
(EDBI), 31 May 2018
p. 353
Annex 163
SWIFT Message from BCP Bank to Bank Pasargad Iran,
7 June 2018
p. 359
Annex 164
SWIFT message from Skandinaviska Enskilda Banken (SEB)
to Bank Melli, 9 June 2018
p. 363
Annex 165 Email from Banco BPM to Bank Pasargad Iran, 16 July 2018
p. 367
Annex 166
SWIFT message from DBS Bank (Singapore) to Bank
Markazi, 17 July 2018
p. 371
Annex 167 Letter from SCOR Global P&C to Central Insurance of Iran,
18 July 2018
p. 375
Annex 168 Letter from La Banque Postale to Bank Melli, 19 July 2018
p. 379
Annex 169 Email from BCP Bank to Export Development Bank of Iran
(EDBI), 23 July 2018
p. 383
Annex 170
SWIFT message from Aktif Bank (Turkey) to Export
Development Bank of Iran (EDBI), 25 July 2018
p. 387
Annex 171
SWIFT message from Aktif Bank to DAY Bank, 26 July 2018
p. 391
Annex 172 Email from Banca Popolare di Sondrio to Bank Pasargad Iran,
30 July 2018
p. 395
Annex 173 Email from Partner Re to Central Insurance of Iran, 3 August
2018
p. 399
Annex 174
SWIFT message from Bank Sohar to Bank Markazi, 6 August
2018
p. 403
Annex 175 Letter from Chedid Re to Central Insurance of Iran,
18 September 2018
p. 407
Annex 176 Email from UIB to Central Insurance of Iran, 24 September
2018
p. 411
Annex 177 Letter from J.B. Boda to Central Insurance of Iran,
p. 415
24 September 2018
Annex 178 Email from Danske Bank to Export Development Bank of
Iran (EDBI), 15 October 2018
p. 419
Annex 179
SWIFT message from BCP Bank to Bank Markazi,
17 October 2018
p. 423
Annex 180
SWIFT message from KBC Bank to Bank Markazi,
17 October 2018
p. 427
Annex 181 Email from Bank of Gansu (China) to Export Development
Bank of Iran (EDBI), 23 October 2018
p. 431
- iv -

Annex 182 Email from Banca Popolare di Sondrio to Export
Development Bank of Iran (EDBI), 14 November 2018
p. 435
Annex 183 Letter from Eximbank Hungary to Export Development Bank
of Iran (EDBI), 27 November 2018
p. 439
Annex 184
SWIFT messages from Mitsubishi UFG Bank to Bank
Maskan, 28 January 2019
p. 443
Annex 185 Letter from the ICC to Iranian parties and to the CILA,
3 April 2019 (redacted)
p. 451
7.4 Other Sources
Annex 186
“Iran, SCOR SE Reach Reinsurance Agreement”, Financial
Tribune, 1 October 2017
p. 457
Annex 187
“Italy’s Danieli Iranian orders blocked after U.S. decision on
nuclear deal”, Reuters, 17 May 2018
p. 461
Annex 188
A. Cremer, “Germany’s DZ Bank to halt Iran transactions in
July”, Reuters, 18 May 2018
p. 465
Annex 189
N. Verma, “Indian banks ask exporters to close Iran deals due
to sanctions”, Reuters, 29 May 2018
p. 469
Annex 190
J. Saul, “Swiss Bank BCP says halts all new business with
Iran”, Reuters, 29 May 2018
p. 473
Annex 191
J. Saul, “Belgium’s KBC to limit Iran transactions after U.S.
sanctions move”, Reuters, 7 June 2018
p. 477
Annex 192 K. Knolle & A. Schwarz-Goerlich, “Austria’s Oberbank
withdraws from Iran”, Reuters, 13 June 2018
p. 481
Annex 193
“India’s top bank to stop handling Iran oil payments”, India
Economic Times, 15 June 2018
p. 485
Annex 194
“OECD Downgrades Iran Credit Rating”, Financial Tribune,
1 July 2018
p. 489
Annex 195
O. Tsukimori & T. Aranaka, “Japanese bank MUFG, Mizuho
to stop Iranian transactions”, Reuters, 12 July 2018
p. 493
Annex 196
I. Landauro, “Scor says will not sign or renew Iran contracts”,
Reuters, 13 July 2018
p. 497
Annex 197 R. Lough & I. Landauro, “U.S. rejects French request for Iran
exemptions as reinsurer Scor pulls out”, Reuters, 13 July 2018
p. 501
Annex 198
“Iran sanctions hurt French cattle farmers”, RFI, 9 August
2018
p. 505
Annex 199
“Taiwan’s Mega Int'l Commercial Bank plans to end TaiwanIran
clearing
mechanism
after
Nov”,
Reuters, 13
August
2018

p.
509
- v -

Annex 200 C. Aizhu & S. Zhang, “As U.S. sanctions loom, China’s Bank
of Kunlun decision to stop receiving Iran Payments -
sources”, Reuters, 23 October 2018
p. 513
Annex 201
“What SWIFT is and why it matters in the US-Iran spat”, Al
Jazeera News, 5 November 2018
p. 519
Annex 202
S. Evans, “AIG winds down underwriting linked with Iran to
comply with U.S. sanctions”, Reinsurance News,
7 November 2018
p. 523
Annex 203
“Marine: International Group of P&I Clubs warns about
insurance
p. 527
cover
for
Iran-related
shipping”,
Asianinsurancereview.com, 29 November 2018
Annex 204
S. Zable, “INSTEX: A Blow to U.S. Sanctions?”,
Lawfareblog, 6 March 2019
p. 531

- vi -

Annex 121
Witness statement by Mr M. Akhbari, Assistant Director of the Economic Research
and Policy Department of the Central Bank of Iran, 16 February 2019

- 1 -

- 2 -

Our Ref. N6.97/420414
Date
Feb. 16, 2019
BANK MARKAZI .JOMHOURI IL.AMI IRAN
(€entrad Bank of the Islamic Repubie of lrau
The Impact of Sanctions on Macroeconomic Indicators
1
I. Mohammad Akhbari, as the Assistant Director of the Economic Research and Policy
Department of the Central Bank of the Islamic Republic of Iran (CBI) since January
2016, testify as follows:
I was recruited as a researcher for the Balance of Payments Division of the CBI in
2004. I have held various positions in the CBI. including one as the head of the
Economic Modeling Division and the other as the Assistant Director of the Economic
Accounts Department. I have personal and direct knowledge of the facts hereinafter
stated except where it is indicated that matters are based on information or belief, in
which case I believe the relevant matters to be true.
I- The Legal and Executive Stance of the CBI
I- According to Article IO of the Monetary and Banking Law of Iran, the objectives of
the CBI are defined as to maintain the value of the currency. achieve equilibrium in the
balance of payments and foreign trade, and assist the economic growth of the country
through the proper implementation of the monetary policy.
II- CBI Plans and Objectives in the Aftermath of the Reim position of
Sanctions on Iran
2- The Iranian economy has been exposed to economic sanctions, mainly imposed
by the US government, over the past decades. One of the most severe instances was
This report was prepared in response to Letter No, 97/377556 by the Vice-Governor for Legal and Parliamentary Affairs
of the CBI, on January 13, 2019, and Letter No, 97/404430 by the Legal Studies Department of the CBI, on February 2.
2019, with the aim of defining the adverse impacts of the return of economic sanctions on Iran and filing a lawsuit against
the United States for the breach of the Treaty of Amity at the International Court of Justice, and shall not be used for any
purposes other than the above
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- 3 -

our Ret. N.971/42041+
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BANK MARKAZI JOMHOURI ISL AMI IRAN
(fentral lank of the Flame Republie of fr an)
the one imposed by the United Nations Security Council as well as the European
countries and the US over the 2012-201 4 period, following Iran's peaceful nuclear
activities. These restrictions remained in effect until 2016 when the Joint
Comprehensive Plan of Action (JCPOA) was concluded. With the implementation
of the nuclear deal and the sanctions relief, Iran's economy experienced positive
developments and the expectation was that the growth of economy would accelerate
over time once the economic and commercial relations with the global counterparts
were duly resumed.
3- With the imposition of different sanctions such as the ban on the purchase and
access to US dollar banknotes, restrictions on foreign institutions' transactions with
the CBI and other Iranian financial institutions, and exports of crude oil, oil
products, and petrochemical products. CBl's access to foreign exchange resources
was partially restricted, leading to major fluctuations and turbulence in the foreign
exchange market. This. coupled with other sanctions imposed on insurance and
reinsurance industries, posed a number of challenges in terms of the imports of
consumer and intermediate goods. Resultantly, the inflation rate started a soaring
trend. which could lead to a decline in GDP growth as well as difficult conditions
for Iranian households in the future. The following is a statistical summary on the
initial impact of US sanctions, which is to be manifested in a greater dimension
over time.
Ill- Sanction Mechanisms on Macroeconomic lndicalors and Damages to
Iranian Economy
4- Foreign exchange and inflation developments: The most important channels
through which the reimposition of US sanctions has affected the Iranian economy are
the rise of uncertainty and the deterioration of the business environment.
Uncertainties arising from the prospective future market. such as developments in
foreign exchange and asset markets, make the economic expectation impact of
sanctions spill over into the real sector of the economy. even prior to the
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Our Ret. N6. 7/4204L4
Date pet.16,201q
BANK MARKAZI JOMHOURI ISLAMI IRAN
(Central Bank of the Islamic Republic of fr an
implementation of sanctions. A review of the trends of the foreign exchange and gold
market developments as of the US breach of the Treaty of Amity is quite indicative
of the high vulnerability of these markets to sanctions' return announcements (Figure
I). The US dollar parity rate vis-it-vis the Iranian rial. for instance. increased more
than four times in the unofficial market in the first six months of the Iranian year
(April-September 2018). Such developments led to an increase in the general price
level. Therefore. the Consumer Price Index (CPI). which rose by an average rate of
about 0. 7 percent on a monthly basis as of July 2015 (the conclusion of the JCPOA)
until April 2018 (US announcement on its withdrawal), accelerated in the nine
months after US withdrawal (May 2018-January 2019) t0 3.8 percent. Meanwhile.
the point-to-point inflation of January 2019 topped 44.2 percent when compared with
January 2018 (Figure 2). It is highly expected that the CPI increasing trend will
continue over the coming months. as the exchange rate developments will affect the
prices.
Figure 1. Foreign Exchange Developments as of April 2018
Thousand
rials
200
180
160
140
120
I00
80
60
40
20
o�---------------
2 a a a a
0¢ 0¢
a¢ 2
FR7FR88888888888855
3388855383&±±z2£=
£8&738878£#2
Source CBI
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- 5 -

'6 $J
Our Ref. N6.92420414
­
Feb. 16, 2019
BANK MARKAZI JOMHOURI ISLAMI IRAN
(Central tank of the lami Republie of fr an)
Figure 2. Point-to-Point (Monthly) Inflation
Percent
50
44.2
45
40
35
30
25
20
15
10
0
c ¢ �
i i i
3
­
2
2
£
=
•
i
z
0
z
ij
� 0
£
�
8
z
017/48
018/19
Source. CBI
5- Although all the main components of the CPI have been almost equally affected
by the foreign exchange market instability in the aftermath of the US withdrawal
from the JCPOA (Figure 3). the "food and beverages" group has been one of the
hardest hit due to its high share in the household consumption basket, especially
that of the low-income groups. The sharp surge in the price of food products upon
the rise of the exchange rate (despite the use of highly subsidized foreign exchange
to finance the import of basic goods at the interbank market rate) has negatively
affected the subsistence of the low-income households. A study of the price
developments of food products in all urban areas indicates that the prices of the
main components of the urban households' food basket experienced a sharp increase
in January 2019 compared with the same month in the previous year (Table I).
Therefore, the minimum calorie required by the low-income groups cannot be
supported due to the sharp rising price of foodstuffs. This increases malnutrition in
the society and threaten the health of the population in general. Moreover, the
government expenditures on health and medical care will soar and the vulnerable
groups will be liable to augmented health costs.
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- 6 -

our Ret. N.97/420414
Date eh,16,1049
BANK MARKAZI JOMHORI ISLAMI IR AN
(fentral Hank of the Islamic Republic of fr an
Figure 3. Point-to-Point (Monthly) Inflation of the CPI of Goods and Services
Miscellaneous goods and services
Restaurants and hotels
Education
Recreation and culture
r
Communication
Transportation
Medical care
Furnishings. household equipment, and routine household maintenance
lousing. water. electricity. gas, and other fuels
Clothing and footwear
Tobacco
--
Food and beverages
0
20
60
80
100
120
140
Jan-I9 Jan-18
Percent
Source CBI
Table I. Point-to-Point (Monthly) Inflation of Price Index of Food and Beverages
Relative weight
January 2019
(percent)
(percent)
Food and beverages
25.5
68.I
Meat
5.3
744
Fish and seafood
60
I 13 7
Bread and cereals
44
34.5
Fats and oils
45.8
08
Fruits and nuts
112.6
55
Vegetables, pulses, and vegetable products
35
610
Source €BI
6- As to the developments of the price index of "housing, water, electricity. gas and
other fuels" group, housing prices (taken as an asset) have experienced sharp rises in
recent months, mainly attributable to instability in the foreign exchange market
(Figure 4). Since the effects of housing price developments on rents will surface with
a lag. rents' sharp increases will severely create welfare challenges in the not too
distant future. Clearly, the lower-income groups will suffer the most from the
economic turbulences, manifested upon the US withdrawal from the nuclear deal.
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BANK MARKAZI JOMIOURI ISLAMI IRAN
(fentral Hank of the Islamic Repubie of fran
Figure 4. Housing Price Developments in Tehran
Percent
Million rials
100
120
90
80
70
60
50
100
80
K
,,
60
"
40
30
II
a
40
20
20
a
-
�
.,
I0
0
-= .. ,
2 5i2 z ]
0
¢
= z5&33; ] ]
•
- .
+ 2
52
=
- t!
£ £
3
i ­
z>=5 iE
3
<23
5 5
0
z
8 5
<2&
£
£
0
£
0
± -
±
�
z
z
"'
2017/18
2018/19
Average price of residential units in Tehran per square meter (right scale)
Growth in the price of residential units in Tehran per square meter
Source. CBI
7- Developments of the real sector of the economy: Imposing oil sanctions affects
GDP both directly and indirectly. The direct manifestation of sanctions on GDP is
the curtailment of oil production and export and restrictions imposed on the
operation of industries such as metal, automotive, and petrochemical industries.
Weaknesses in the productive activities of these industries on the one hand and the
decrease in the foreign exchange availabilities on the other hand. and the weak
performance of other economic sectors including manufacturing and services are
regarded as indirect effects of sanctions on GDP.
8- If the push for strengthening sanctions brings about higher restrictions on oil
export and foreign transactions. as US is threatening to cut Iran's oil export to zero.
GDP may decline roughly by 22 percent compared with the period prior to the
reimposition of sanctions. The US sweeping and wide-ranging sanctions have
exerted sharp impact on different sectors and industries (Table 2). Accordingly.
based on data released by Economic Statistics Department of the CBI. the
production index of large manufacturing establishments declined by about 3.9
percent in the second quarter of20 18/19 compared with the respective period of the
previous year (Figure 5)
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- 8 -

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Our Ref, N6. 97/420414
Date
Feb. 16, 2019
BANK MARKAZI .JOMHO!IRI ISL.AMI IRAN
(Central Bank of the Islamic Republic of Iran )
Table 2. Growth in the Volume of Selected Manufacturing Products
(percent)
2017/18
2018/19
QI
02
04
0
01
02
Tow truck
20.9
128
19 3
-1s.7
84
-26.2
Combine
74.5
180.0
126.9
15.2
-77.0
-50.0
Tractor
32.9
216
I5.6
-0.7
-6.I
-12.3
Vegetable oil
1.6
J9
.9.7
97
-10.2
.9.3
Pharmaceuticals
-44
-4.8
-14.8
61
-9.2
.1
Detergents
-3.5
-2.8
-5.5
10.2
10.8
-10.2
Paper
25.9
$9.5
-0.9
474
18.8
-2s.7
Pesticides
21.8
3.9
I8.9
5.2
-22.0
-16.5
Television
-6.0
$.7
-13.I
-331
-22.8
-35.2
Refrigerator
19.9
II 3
-31.3
34.9
-16.9
-14.7
Washing machine
42.8
254
-9.2
-149
-25.2
-50.3
Source AMunstry of Industry. Mine. and Trade
Figure 5. Production Index of Large Manufacturing Establishments
teach quarter compared with the respective period of the previous year)
14
12
125
1I4
1o
8
6.5
5.2
59 60
5.0
6
4
3 3
2
0
-0.4
-2
-4
.39
-6
2
3
2
3
2016/17
2017/18
.J
2018/19
Source CBI
9- Some industries. like the automotive industry, have been adversely affected by the
US imposed sanctions just because of high dependence of this industry on imports
and foreign exchange transactions with the outside world. The latest figures indicate
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- 9 -

6 $9y
Our Ref. N. 7/4204L4
Date
et. 16. 201
BANK MARKAZI JOMHOURI ISLAMI IRAN
(Central Bank of the Islamic Republic of Iran)
a 57 percent decline in Iran's car manufacturing activities and output (Figure 6),
which unfavorably affects other manufacturing sectors as a result of backward and
forward connections with other industries. In parallel with these negative changes,
the services sector is affected negatively and its value-added figure will plunge.
Overall, considering the channels through which sanctions, especially those on oil
exports, could affect the economy and given an approximate decrease of 17 million
barrels a day in the exports of crude oil and gas condensate compared with 2017/18.
GDP decreased by 4.4 percent in the first nine months of 2018/19 compared with the
respective period of the previous year. Based on estimates, if oil exports cease totally,
the GDP will fall headlong as a result by more than 30 percent.
Figure 6. Production of Light- and Heavy-duty Vehicles
Percent
I housand
30
20
I0
lOO
450
0
-10
400
350
300
-20
-30
-40
-50
-60
-70
250
200
I50
100
50
0
2017/18. Q1 2017/18.02 2017/18.03 2017/18,04 2018/19,01 2018/19,02 2018/19.03
production of light- and heavy -duty vehicles (right scale)
growth in production of light- and heavy -duty vehicles
Source Supplying Automotive Parts Company (SAP€O)
I 0- Economic sanctions. even if enforced indirectly. will affect economic growth.
The US primary and secondary sanctions brought to a halt the business
undertakings of international enterprises with
local Iranian companies. This
prevents companies with the most advanced technologies from investment in Iran.
P,0.BOX: 15875/7177,No,198 Mirdamad Bvd,, Tel; 009821 29951 Fas + 009821 66735674
8
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- 10 -

6 $J
Ou Ref. No. 97447044.4
Date
Feb. 16, 2019
BANK MARKAZI JOMHOURI ISL.AMI IRAN
(Central Bank of the Islamic Republie of Iran
which hampers productivity and curbs economic growth. Moreover. deceleration
of economic activities and lack of replacement investment for depreciable assets
and equipment in different economic sectors will be a daunting challenge in keeping
up with the required long-term growth of the country.
11- Restrictions on foreign transactions: The reinforcement of sanctions lowers
the availabilities and access to foreign exchange and hence lowers imports capacity.
which in turn damages local production. Intermediate goods and raw materials as
well as capital goods comprise a very high share of Iran's total imports (75 percent
of total imports in 2017/18 and 81 percent in the first 6 months of 2018/19).
Restrictions on foreign exchange transactions have created leverage for Iran trade
partners and countries that are exporting to Iran to put pressure on Iran. This has
created large negative impacts on pricing practices and quality of goods imported
into Iran. Needless to say, all negative impacts of higher import costs and prices of
goods and services are finally incurred on Iranian households and negatively affect
their welfare. Based on preliminary data released by Islamic Republic of Iran
Customs Administration, the value of imports decreased by 21.5 percent in the first
eleven months of 2018/19 compared with the respective period in the previous year.
Moreover. the imports of "raw materials and intermediate goods" and "capital
goods" declined by I 0.5 and 18.0 percent. respectively. in the first nine months of
2018/19 compared with the corresponding period in 2017/18.
12- Government budget condition: Given that almost 2 percent of government
budget sources are financed out of the exports of crude oil and natural gas
condensate, the lower income from these items causes difficulties especially for
capital expenditure in government budget. Lower government capital expenditure
negatively affects government disbursements on gross fixed capital formation
(GFCF) which
in turn
lowers GDP growth and employment generation
opportunities. More importantly. the slow economic activities cause lower tax
revenue for government. Low government revenue and pressure on government
6
expenditure, due to inflationary impaets of reinforced sanctions, increase budget
e
" 0
0
"e
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9
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- 11 -

'6 $9J
Our Ref. N6. 97/4424444
Date
Fe. 16, 2019
BANK MARKAZI JOMHOURI ISLAMI IRAN
(Central Bank of the Islamic Republie of lran)
deficit which deteriorates uncertainties related to budget deficit financing.
Therefore. it is highly expected that the vicious circle of budget deficit. Central
Bank financing, higher liquidity, and higher in nation would take a new bout which
may lead to hyperinflation.
I believe that the facts stated herein are true.
Mohammad Akhbari
Signature
Email address: [email protected]
6
0
.•
0
e
:•
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I0
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- 12 -

Annex 122
Witness statement of Mr A. Jamali, President of the OIETAI, 26 March 2019

- 13 -

- 14 -

Islamic Republic of Iran
inistry of Economic Affairs and Finance
ganization for Investment
+8+_1.21
conomic and technical Assistance of [ran
Date: 2_6 March 20l9
I, Dr. Ahmad Jamali, the acting President of the Organization for Investment,
Economic and Technical Assistance of Iran ('OIETAI), with registered office at I5
Khordad Sq, Davar Ave, Tehran, Iran, having occupied the positions of acting
President of the Organization for Investment, Economic and Technical Assistance of
Iran and the Director General of Foreign Investment Office; being responsible for the
following duties since my appointment in January 2019 as the Acting President of
(OIETAI) and in 2015 as the Director General of Foreign Investment Office:
The president of the Organization is ex-officio the Deputy Minister for Investments
and International Affairs of the Ministry of Economic Affairs and Finance The
Organization performs its duties in accordance with its statutes and such other
legislation governing foreign investment in Iran, loans and credits borrowings from
international sources, coordinating and expanding relations with other countries and
regional, as well as international economic and financial institutions and agencies.
Testify that I have personal and direct knowledge of the facts hereinafter stated except
where it is indicated that matters are based on information or belief, in which case I
believe the relevant matters to be true.
1. The Organization for Investment, Economic and Technical Assistance of Iran
(OIETAI) is affiliated to the Ministry of Economic Affairs and Finance and
represents Iran's central investment promotion authority. The General
Directorate for Foreign Investments within the Organization is responsible to
receive all investment applications as well as issuance of license, conduct of
affairs and safeguard all rights and entitlements of foreign investors in approved
investment projects, and also to serve the investors by way of assisting,
coordinating and facilitating all
issues pertaining to their
investments
throughout the licensing process and ever after.
2. Being the investment authority, the Organization is also responsible for all
transfcrs and repatriation affairs of the foreign investments as well as all
arrangements and conduct of negotiations related to the bilateral and
multilateral agreements for the promotion and reciprocal protection of
investments ( BITs ) with other governments and international organizations.
3. The lifting of the US nuclear-related sanctions in January 2016 was
immediately followed by an important influx of foreign investment in Iran. The
flow of foreign direct investment into Iran, which stagnated around USD 2
billion in 2014 and 2015, surged in the following two years, reaching USO
5 billion in 2017. All sectors of the Iranian economy and all regions of the
Iranian territory benefited from this surge of foreign investments. Levels of
foreign investments after the implementation of the JCPOA were actually above
our own expectations.
Address: Davar Ave. Tehran - Iran PO.Box: 11365/4618 Tel:39909 www.investiniran.ir
- 15 -

Islamic Republic of Iran
nistry of Economic Affairs and Finance
er841-21
ganization for Investment
onomic and technical Assistance of Iran
Date: 2_6 March 2019
4. After the 8 May 2018, the OIETAI noticed a sudden and sharp drop in the
requests for investment licenses by foreign investors,
and a similar decrease in
the amount of foreign investments actually brought into Iran' Comparing 9
months period of Foreign Investment Licenses approved by the Foreign
Investment Board, from March to December 2016 and 2017 (preceding Persian
calendar year), amounting to 8.9 and 8.2 USD billion, with the period of
March to December 20 I 8, which is 1.6 USD billion, shows an %80 drop in the
total amount of investment licenses issued. Is appended to this witness
statement, as an Annex , tables issued by the OIETAI, comparing two 9-month
periods before and after May 2018.
1
5. All the sectors of the Iranian economy have been concerned by this brutal
decrease in the importation of foreign capital which notably caused job losses
among the Iranian workers these investments projects were employing;
however, the energy oil, gas, petrochemical and renewal energy , the
automotive and infrastructure have been the most impacted.
6. After 8 May 2018, major foreign investors, such as multinational companies,
have ceased or suspended their investments in Iran, indicating that they did not
want to jeopardize their other activities, notably in the U.S., or even be
themselves the subject of U.S, sanctions. Smaller investors have also reduced or
stopped their investments because of issues related to transfer of funds and
revenues through the international banking system and to transportation of
equipment.
7. Similarly, whereas after January 2016 numerous States entered into negotiations
with Iran for the conclusion of a bilateral investment treaty (between January
2016 and May 2018, 8 BITs were signed, 5 of which were ratified, including
with Japan and the Russian Federation), after May 2018 the States which were
negotiating such treaties either refused to sign the draft of the BTls they had
negotiated with iran or ceased the negotiations at an early stage.
Jan-j2
Ji
Ahmad
- 16 -
a
CA-
Acting'President
The Organization for Investment, Economic
and Technical Assistance of Iran(OIETAI)
' The admission of foreign investments is the responsibility of Iran's Foreign Investment Board, which issues an
investment permit upon approval of any foreign investments. The Board also monitors the inflow, use and
repatriation of foreign capital in the context pf the said admitted investments.
' This ratio was established comparing 9-month periods before and after 8 May 2018: May 2018 -January 2019
against September 2017-April 2018.
Address: Davar Ave, Tehran - Iran PO.Box: 11365/4618 Tel:39909 www.investiniran.ir

Tables of foreign investment projects approved during the first 9 months of the years 1395-1397
The approved investment projects of the first (9) month of 1395(March-December 2016)
Economic Fields of
Investment volume
Proiects
{thousand dollars]
Supply of water,
2.807.832
electricity and gas
Transport and
119.957
communications
Services
1.501.729
Building Construction
5.650
Industry
4.037.398
Agriculture
432.856
Mining
17.000
Total
8.922.422
The approved investment projects of the first (9) month of 1396(March-December 2017)
Economic Fields of
Investment volume
Projects
(thousand dollars)
Supply of water,
2.047.213
electricitv and gas
Transport and
650.651
communications
Services
510.455
Building Construction
28.329
Industry
2.086.100
Agriculture
32.360
Mining
2.901.527
Total
8.256.635
The approved investment projects of the first (9) month of 1397(March-December 2018)
Economic Fields of
Investment volume
Prolects
(thousand dollars)
Supply of water,
454.979
electricity and gas
Transport and
11.290
communications
Services
309.279
Building Construction
5.485
Industry
794.532
Agriculture
46.850
Mining
2.200
Total
1.624.615
- 17 -

- 18 -

Annex 123
Central Bank of Iran, “Selected Economic Indicators, Balance of Payment”, Persian
years 1394 (21 March 2015 – 19 March 2016), 1395 (20 March 2016 – 20 March 2017)
and 1396 (21 March 2017 – 20 March 2018)

- 19 -

- 20 -

Table 1
Balance of Payments
thou dollar
1392
19
1394
SC
1960
feteotage change
Current account
23,105
,7
127
16,388
$.8I6
.35
(lewd« ecot
29.126
18.060
$.34
20.8-4
221%
4
forts (on
92.910
88,976
62.99$
83,78
98.142
19
o'
6A,$40
$$406
1.884
$$.792
6$.81¥
I8 I
Non-oil
28.369
33.$69
31,147
28.226
32.324
14.5
mp0rs(OH)
63.5-4
70.91$
57.04l
631,13$
7$.546
I97
Gas and oil products
3,263
2.397
1,639
1.388
27%4
99.1
0her
6032
68.31
6.00
61,747
72.72
17
Se4vied asotad
-6.820
6.77
4,783
-5.941
-7,916
33.2
lrone account
2.04
1.4
24
2
66
-279
Current transfers aoot
65
943
427
$$$
467
16.3
Capital acount (net
-9.32
599
23146
-1.2%
-19.321
56
fros Al osion
-2,595
·$,569
-1,so
-$,66
-4,615
.196
(er.all balawe
15,10
.561
1,23
-,666
,140
6.
vlue of rude oil. oil products natural gas, natural gas condensate. and naragas liquids (ariff Coles: 2709,2710 and 27II) ported by National lr.aria Oil Company (IoC) National lranu
Gas Coup+u (NIGCI National lranin ol Rfining d Distribution Comp (NORD€), ptrosh.meal comps, ad others (stet ad not-sue ton
glue of oil products, natural gas, natural gas condensate, and natural gas liquids (fariff Codes 270,2710 and 27I9) imported by NOC, NCC, NIORDK. ad others (cstoms and non-cwtoms)
Fieurs are pr,lunar
fable2
Foreign Trade'
alure (weighty
erg value
(thousand tons
(mullion 1$$
(Us pr ton)
(million USS)
(LS per ton
Tarvard
2.230
328
2,091
2,348
1.12
.712
31,186
165
3,066
1,416
I,440
Klothd
3,037
3$T
3,49.2
4,808
1.77
Li
2.60
390
4.240
I,66
3.12
9
292
3.62
1.24
hahnvar
,06.
2.7$0
304
4.193
7,0.8
3,$71
4$2
2,7
4,222
1.$42
Aban
9.58
3.308
3.637
4.603
1.266
Art
2,61
312
3,026
$,1$1
1.702
48t
28
1,896
1 \44
aha
1,7$
31,992
6
1,442
4,8$2
12.920
4,492
348
4,803
6,646
39,8452
3,7.%
$4,02
'Source Islamic Republic of ran Customs Administration (pelininary figures
E«eludes natural pas condensate
- 21 -

Eferal Debt'
Table3
(end of the month)
(mlloin dollar»)
Short-term
Medan- and long- ten
Totd
Efad
4.197
6.71
10.910
'asd on original maturity
Echange Rate (USS/IRR)
Pae alel market rate
(avcrag selling rate)
Df.ad
371,424
46.44
- 22 -

Table 1
Balance of Payments
mllon dollar
in months
1392
1393
1394
139!0
1395
19%
Perssnags chg
25.10S
13.371
1.237
16.$8
L,91S
10.914
-.4
29.126
18.060
$,3$4
20.884
6.06
I6.169
21
torts ( 0)
92910
88.976
62.995
883,978%
60.22
69.078
14.6
64.140
5$,406
1,848
3$3.71$2
39.877
46,370
16.
28.36
3$.$6
31.147
28.226
20,415
22.708
L.2
lnperts «TOD
63.584
70.915
7.641
63.13$
44.256
92,710
19.1
1.26.1
2,87
1,619
1.x
1.172
I44l
22.9
60.321
68,318
6,00.3
61.747
43.085
'1,269
19.0
6,820
-6,877
-4,78$
-5$,94
-$.222
6.567
2.¥
Jot asvunl
2.0.4
1,845
241
928
771
68°
12.5
Curren transfers sound
$65
$4$
427
$5
416
34
-I8.D
Capital ssoant (mt)
-9.321
$39
2.346
-18.288
14.14
.16.6
·1L.79.
L.rots and emission
-2.3$$
-$.$69
-1.30
-5,66
-$,657
-7.752
37.0
1$.189
8,561
2.23
-7.,666
7.87
8,61
9.6
le of crude on, ol prodes, natural pas, natural as condensate, and natal gas liquids (Taitt Codee 2709, 2710 d 711exported hy National lraian Oil Comnpy (NIO€) National lrian
Gas Company (NIGG) National Iranian i Refining and Distribution Compare (N[ORD() petrochemical companies, ad others (customs and non-customs)
tue of oil products, natural gas. natural gas condesats, and natural gas liquads «Tail Codes. 2709,2710 ad 2711 imported b NIOC. NICC NIORDC, and others (ustoms and non-sstom
Figures are preliminarv
Foreign Trade'
Non-oil exports
atu oweight)
one
(thoued toes)
(ml ho I8$
(ss per ton)
(thour.and tons)
6million IS$
arvandin
2.20
328
2.09
2.348
1.12
.712
165
1,066
4416
I.440
hordd
8.505
3.07
87
3.492
4.808
1.377
7,692
1$0
2,65l
4,240
1.600
Mordad
$.86
3.129
39
292
1.24
hghrrar
9.06.
2,75
2,969
4,15
1,199
Mr
7.908
3.571
452
2.73%
4.222
Aban
3.30
3.637
4.603
wt
8,458
2.639
312
3.026
1,702
Total
«,<
351
,41
'Souse l«lame Republic ot ran Cu«toe Administration (elinary figures)
]eludes natural gas condensate
- 23 -

Eferal Debt'
Table3
(end of the month)
(mlloin dollar»)
Short-term
Medan- and long- ten
Totd
6.160
9,885
'asd on original maturity
Echange Rate (USS/IRR)
Pae alel market rate
(avcrag selling rate)
3$,42
4L,664
- 24 -

Table 1
Balance of Payments
mllon dollar
Six months.L
1392
1393
1394
139!0
1395
19%
Perssnags chg
25.10S
13.371
1.237
16.$8
8.0
7.441
14.4
29.126
18.060
$,3$4
20.884
0,64
10,726
07
torts ( 0)
92910
88.976
62.995
883,978%
38144
44.278¥
16.I
64.140
5$,406
1,848
3$3.71$2
24.807
29.902
20.
28.36
3$.$6
31.147
28.226
13.3$$7
4.576
7.8¥
lnperts «TOD
63.584
70.915
7.641
63.13$
27.495
33.$92
22.0
1.26.1
2,87
1,619
1.x
624
6$4
49
60.321
68,318
6,00.3
61.747
26,872
32.88
224
6,820
-6,877
-4,78$
-5$,94
-2,74
-1,010
.5
Jot asvunl
2.0.4
1,845
241
928
$$8
$0
·10.
Curren transfers sound
$65
$4$
427
$5
27
224
19.2
Capital ssoant (mt)
-9.321
$39
2.346
-18.288
-10.8.36
6.24
41.9
L.rots and emission
-2.3$$
-$.$69
-1.30
-5,66
-$.49
-6.700
21.9
1$.189
8,561
2.23
-7.,666
-7,644 <$5
274
le of crude on, ol prodes, natural pas, natural as condensate, and natal gas liquids (Taitt Codee 2709, 2710 d 711exported hy National lraian Oil Comnpy (NIO€) National lrian
Gas Company (NIGG) National Iranian i Refining and Distribution Compare (N[ORD() petrochemical companies, ad others (customs and non-customs)
tue of oil products, natural gas. natural gas condesats, and natural gas liquads «Tail Codes. 2709,2710 ad 2711 imported b NIOC. NICC NIORDC, and others (ustoms and non-sstom
lines are preliminary
Ible 2
Foreign Trade'
Non-oil exports
lots
1$9%
olme (weighty
Value
Average value
volume
value
Average value
(thoued toes) (l hon I8$
sS per ton)
(thousand tom) (tho (IS$
(USS per ton
arvandin
6,80$
2.20
32
2.01
2.4
1.12
Odhehes.ht
.712
3,186
65
066
4.416
.440
hordad
8.$05
3.07
3$7
1.42
4,80
1,
Ti
7,62
2,69%0
350
2.651
4.240
I.600
Mordad
$.86
3.129
J9
2925
3.62
1241
hghrrar
9.06
2,750
0
29%69
415
199
otal
49,66
17,02
4
17,195
23.59
1.372
Source lslamie Republic of ran Customs Administration (preliminary figure»)
±eludes natural gas condensate
- 25 -

Eferal Debt'
Table3
(end of the month)
(mlloin dollar»)
Short-term
Medan- and long- ten
Totd
Shah var
3.466
$.978
'asd on original maturity
Echange Rate (USS/IRR)
Pae alel market rate
(avcrag selling rate)
Sladuvar
393,07
- 26 -

Table f
Balance of Payments
(nm lhon dollars
Plinary
Thee months (prlinary)
139,2
1393
1394
195
1395
1396
Percentage chge
Cuneut account
25.105
13,57¥
1.237
16.388
5.231
3.172
-28.8
Goods cont
29,26
18.060
.354
20.84
6.522
$,059
-224
Eport (FOB)
92916
88 976
62,99$
83,978
1&,90$
21342
129
ol'
64.540
55,06
31.84
55$.732
11.640
14,166
21.7
Non-ol
28.369
33.569
31.147
28..2.26
7.26-4
7.176
-1
Import (FOR
63.584
70.91$
£7641
63.13$
12,38
16.28
1.°
Cs and oil products
,26
2997
1.639
.88
101
29
-2.9
Others
60.321
68,31
56.003
61.747
12.0
15.90
324
Services account
6.820
6.877
4,78
-5,941
-1,610
-1.713
6.4
none coot
2.04
1,845
24l
9,2
I
26.3
2.5
Current trastars account
$65
543
427
$58
12I
114
-5.5
Capital account (net
-9.321
559
2.346
-1.28¥
-5.022
-1.338
.73.J
Errors and omisons
-2$95
-5.569
-1.30
-$.766
6.380
-3.970
371.$
Overall balms
13.189
8.$61
2.2
-7.666
617
-1.5$8$
.743
'value of crude ol ol products. natural gs, natural gas coodcsatc, and natl gas liquds (Taft Codes: 2709. 2710 ad 2711 cp0rtod by National lrain Oil Company (NIO, National Iraniau
G« Company (Noc atonal lrnian Oil Refimog and Distribution Company (AN'OR DC) petrochemical com panes, and others (stores and non-cunto)
value of oil products. natural gas. natural gas condensate, ad nanwal gas liquids (Titf Codes: 2709. 2710 ad 7II imported by NOC. NIGC, NIORDK sad others (customs ad non -customs)
Table 2
Foreign Trade'
on-oil experts
Import
19%
Volume (weight)
Value
Average value
olum
Value
Avenge value
(thousand to)
(nllon LS$ USS pr tou)
(thousand tons) mullion US
(US$ pr to
Pervadin
6.8805
2.20
3.28
201
2.34
L.12
Ord1bxhesart
.732
3,186
365
3,066
4.416
1,440
Khondad
8.50s
3.67
$7
3.492
4.808
1.377
Total
24,042
8,4$
35
8.649
11,s72
1.338
Souroe lami Republic of Iran Customs dministraton (prclimnary fun
Flad natural ga end.an st.
- 27 -

Eternal Debt'
fable
(end of the month)
(mlfen dollars)
Short-tann
Modiusn- and long-t,nm
total
196
Kho«dad
1.472
5,494
ad on original maturity
Table 4
Echange Rate (USS/IRR)
Interbank market rte
llel market ale
(urvere selhng rate)
(verse «eling rte)
1)96
Khdad
37,356
- 28 -

Ible f
Balance of Payments
nillion dollars)
Twelve months (pueliminry)
1391
1392
1393
1394
1395
Russnlags slangs
2$.362
25,108
3.TL
,016
I6.588
8L8
Gioode account
2.$6
29,126
8.96
2,17¥
20.84
71.2
porns (FOB)
97.296 210
88,976
64,597
83.978
30.0
oi'
68.08.3
64.540
55.40%6
33,569
3$.752
66.1
ion-l
29.215
28.369
3$,569
31,028
28,226
9,0
Imper» (FOD)
68.74
63.'84
70.215
32.419
63.13$
20.4
Cs and oil products
2692
3,26
2.597
2,21
L.3MK
-7.
66.082
60,21
68.918
$0,186
61.747
23.0
-7.359
-6,820
6.877
-1,472
-$,941
28
1.649
20.34
L.845
763
28
21.6
0
$6.'
$4
$47
95
1.
-9,048
-9.321
$
·2.91
-18.288
Lot and ors
-L.20
-259$
-1569
4,270
-5,766
35.0
12.21
13.18
8.561
2.23
.7.666
he of erde oil, ol products, natal as. natal gas condensate, ad natural ga lied (Tant €odee 2709, 271 an1 2749exported by National loan Oil Com@pay +IO€). National lraia
Gas Company (NI6Cy National Iranian ti &efining and Distribution Compare (NORD), petrochemical companies, and others (customns and nor-customs)
ulue of oil products. natural gas, natural gas condensate, and natural ga hquud (Tant €odes. 2709.2710 and211)imported b NIOC. NG€, NORD, and others (svstons and not-sustoms)
t A4are than S00 pencent nercas¢
fabe 2
Foreign Trade'
Non-oil exports
[ports
Votuts (wight)
Vol.
Yalu,
Arag: vatu.
(loud to)
(nullo 1S$
US per ton)
(Llousad to)
tulle Is$ USS per ton)
larvardin
6.84
2,462
360
1.92$
,90
1.02
3,0s
38s
2.63$
1.14
.911
Khordad
8,169
3.014
2.70
3.$04
1.,296
74$2
2,6$$
2.69
,864
1,434
Mordad
1,371
2.462
3.208
3,844
1,198
7,442
272
319
2622
3.599
1.72
Mee
7,038
2.38
339
2940
3,743
1,273
Abar
2.99
399
2.83$
31.331
1.7%
Ara
7,960
2,7f
61
3,30.
4.155
1258
.4I
2.774
127
268
.444
12Kl
'uhnan
879
2449
4
1,40 t
sfat
1$,020
4,562
04
.194
',269
1552
total
101,2$9
41
,199
4.684
o8
'sue. llme Republic of Iran Caston Administration
Eeluds naturlgsondsnats and lqclid natural gas
- 29 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
ftand
1.12
$,170
8.48l
Bud ou orig
i nal ruat unity
Echange Rate (USS/IRR)
nterhank market rat
aell market rate
(verge selling rate)
(average selling sate)
1i95
fad
32410
37,721
- 30 -

Table f
Balance of Payments
null on dollar»
eliminry
Nine moths (preliminary)
1391
1392
139
1394
1394
195
Rerssnlag shangs
23.362
25.105
1s,571
.016
9,953
11.915
19.7
Goede aeont
28x,56
29.126
.060
1217
1.o
6,0.6
'"
97.296
2910
8N8.76
64.97
0,34
60.22
197
ot'
68.08
64,940
$$.406
393,'69
27.09
39.877
47.2
on-ol
2.21$
28.46
$$,569
3L.0.2
23.21
20,415
12.5
Import (FOD)
68.734
6.584
70.15
$2.419
3J8$.58
44,256
14.7
Gas and oil prodaets
2,692
1,26
2.897
221
,71
1,172
-1$
Other
66.082
60,321
68.318
90,186
6.872
43,085
16.8
Service« count
-7,31$9
6,820
-6.877
-4.472
-1042
-$,222
716
1.649
2.0.4
1.845
76.J
786
685
-12.8
$0
$6.5
$4
$47
408
416
20
Capital asst (mst)
-9,948
-9.321
$59
·2.91
2.070
·14.134
rrors ad orisiot
-1.201
-2.595
-$,56
4.270
8,285
-16$7
-31.5
12.21
13.189
8.$61
22
31.768
.7.875
he of erde oil, ol products, natal as. natal gas condensate, ad natural ga lied (Tant €odee 2709, 271 an1 2749exported by National loan Oil Com@pay +IO€). National lraia
Gas Company (NI6Cy National Iranian ti &efining and Distribution Compare (NORD), petrochemical companies, and others (customns and nor-customs)
utu of oil products, natural gas, natural gars sond.nots, and natural gas bqude (Till Cods. 2709.2710 and211)imported b NIOC. NG€, NIORD. and others (sustoms and not-stoms)
Ible 2
Foreign Trade'
Non-oil exports
lonts
1$5
atu oweight)
Volume
(thoued toes)
(thous.and to)
(million (I8$)
arvandin
2462
360
192$
L,980
1.02
3,10$
8$
2.635
3,517
1.3135
hordd
,I69
3.014
369
2.70
3.504
1.2%
2,655
356
2.695
1.86.4
1.44
Mordad
1.571
2.462
3.20$
92°
3.844
1.,19$
hghrrar
7.442
2,72
19
1,72
Mr
7,038
2.38
339
3.743
1,273
Aban
2.99
39
2.83$
1.176
wt
7960
2.871
36
3.30
1,29$
Total
6979
24,51%
35
1,26
'gauwe Blame Republic of ra Customs Administration
'f«eludes natal gas condensate and liquefied natural ga
- 31 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
395
AA.ad
'ed on original maturity
fable 4
Echange Rate (USS/IRR
terhank market rat,
Pe all market rate
(average selling rate)
13
A/a
3214
18,63.
- 32 -

Table f
Balance of Payments
null on dollar»
eliminry
ix months ipveliminary)
1391
1392
139
1394
1394
195
Rerssnlag shangs
23.362
25.105
IS,86l
9,016
6.136
8.60
41.6
Goede aeont
28x,56
29.126
21.12
2.17¥
7,$42
10.64
412
97.296
2910
6,47l
64,597
33.616
38.144
13$
ot'
68.08
64,940
$$.352
33.569
20.065
24.807
23.6
on-ol
2.21$
28.46
1,11
51,028
1$.591
13.387
-I6
Import (FOD)
68.734
6.584
65,079
92.419
26.,073
27.45
$.$
Gas and oil prodaets
2,692
1,26
94
2.21
1,090
624
42
Other
66.082
60,321
61 131
90.186
24.98.
26.872
7.6
Service« count
-7,31$9
6,820
-6.9$
-4,472
-2.29
-2,794
224
1.649
2.0.4
943
76
$97
$3$
6.6
$0
$6.5
11
$47
280
217
-LU
Capital asst (mst)
-9,948
-9.321
-1.664
-2.91
.92
-10.8G
rrors ad orisiot
-1.201
-2.595
-$,635
-4,270
-5.49
-4.522
216
12.21
13.189
8.$61
2.23
1,562
-7.644
he of erde oil, ol products, natal as. natal gas condensate, ad natural ga lied (Tant €odee 2709, 271 an1 2749exported by National loan Oil Com@pay +IO€). National lraia
Gas Company (NI6Cy National Iranian ti &efining and Distribution Compare (NORD), petrochemical companies, and others (customns and nor-customs)
utu of oil products, natural gas, natural gars sond.nots, and natural gas bqude (Till Cods. 2709.2710 and211)imported b NIOC. NG€, NIORD. and others (sustoms and not-stoms)
More than 500 percent increase
Ible 2
Foreign Trade
Non-oil exports
lonts
1$5
atu oweight)
Volume
Value
werge vat
(thoued toes)
(nlho 1IS$)
IS$ per ton)y
(thous.and to)
(million (I8$)
(ts$per ton)
arvandin
2462
360
192$
L,980
1.02
3,10$
8$
2.635
3,517
1.3135
hordd
,I69
3.014
2.70
3.504
1.2%
1,623
4614
97
2.695
1.86.4
1.44
Mordad
1.571
2.44
32
3.20$
3.844
1.,19$
7.442
2,72
19
2.622
,599
1,72
$0,24
1,21o
I5.M
20,10
1,26
Source lslmic Republic of tun Customs Administration (pelirinary figures far Shahiva 19$)
'Eu.ludo natural ga somdnats
- 33 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
395
Shahrivar
261
$.29
7910
'ed on original maturity
fable 4
Echange Rate (USS/IRR
terhank market rat,
Pe all market rate
(average selling rate)
13
Shalt+var
31.274
3,7
- 34 -

Ible f
Balance of Payments
nillion dollars)
Preliminary
Three momths (preliminary)
131
192
139
1394
1394
1395
Russnlags slangs
23,362
25.105
$,86l
,016
3947
$.2$1
32.5
Ci0ode second
28,$6
29.126
21,19.2
2,17¥
4,77
6.$22
6.5
porns (FOB)
97.29%
2910
6,47
64,597
17,680
18.90$
6.
oi'
68.083
64,940
$$.392
33,569
10,633
11.640
.5
ion-l
29.21$
28.46
91,11
31,028
7,047
7.264
$.
Imper» (FOD)
68.74
6.584
6$,079
32.419
12.902
12.38
-4.0
Cs and oil products
2692
1,26
,94
2,21
617
301
-$2.7
Ohr
66.082
60,321
61 131
$0.186
12.26$
12.081
1.5
-7,3159
6,820
-6.9$
-1,472
-1,206
-1,61o
16
1.64
2.0.4
4.
761
27
1
-16.
0
$6.5
51
$47
13
12l
-126
-9,948
-9.321
-1.6Gd
-2.513J
-4.218
-5.022
19.
Lot and ors
-1.201
-289$
-$,635
-4,270
-3%
-6.380
12.213
13.189
8.$61
2.23
-647
6.171
he of erde oil, ol products, natal as. natal gas condensate, ad natural ga lied (Tant €odee 2709, 271 an1 2749exported by National loan Oil Com@pay +IO€). National lraia
Gas Company (NI6Cy National Iranian ti &efining and Distribution Compare (NORD), petrochemical companies, and others (customns and nor-customs)
utu of oil products, natural gas, natural gars sond.nots, and natural gas bqude (Till Cods. 2709.2710 and211)imported b NIOC. NG€, NIORD. and others (sustoms and not-stoms)
More than 500 percent increase
Ible 2
Foreign Trade
Non-oil exports
lonts
atu oweight)
Volume
Value
(thoued toes)
(thous.and to)
(million (I8$)
arvard.in
2.462
1925
L,980
L.0
04hehes.ht
3,0s
2.63
1
1.15
hordd
,014
2,70
,04
8,781
7
7,26
9,001
1,29
Soune Islamic Republic of lean Cu«toms Administration (preliminary figure« for fir 195
'pludes natural g condensate
- 35 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
395
222s
737l
'ed on original maturity
Echange Rate (USS/IRR
terhank market rat,
Pe all market rate
(average selling rate)
13
hordad
30.477
- 36 -

Ible f
Balance of Payments
nillion dollars)
Twelve months (pueliminry)
1390
191
1392
139.3
1394
Russnlags slangs
$8.507
23,362
25$,105
1$.861
9,016
43.2
Ci0ode second
67.779
28,56
29.126
21.2
12.17
43
porns (FOB)
4$.806
97.29%
92910
86.47l
64.87
-283
oi'
19.148
68.08.
64.$40
$5.3$2
33,869
-19.4
ion-l
26.638
29.21$
28,36
91.11
31,02
-0.3
Imper» (FOD)
78.027
68.74
63.584
6$.079
$2.419
-19.$
Cs and oil products
$,726
2692
3.26
3,94
2.2
.4 4
Ohr
72.30
66,082
60,21
61,131 0.186
.179
-9,771
-7,3199
6,820
-6,98$
-4,472
.6.0
9
1.64
2034
94
76
·19.
406
0
65
9
47
7.1
-19.304
-9,948
-9.321
-1.664
-2.913
91.0
Lot and ors
-17.766
-L.20
-2.595
-$.635
4,270
-24.2
21.436
12.213
13.18
8.$61
2.2
.73.9
he of erde oil, ol products, natal as. natal gas condensate, ad natural ga lied (Tant €odee 2709, 271 an1 2749exported by National loan Oil Com@pay +IO€). National lraia
Gas Company (NI6Cy National Iranian ti &efining and Distribution Compare (NORD), petrochemical companies, and others (customns and nor-customs)
'
of oil products, natural gas, atonal gars sondcost, aud natool gars liquids (Tit Codes. 2709, 2710 ad 274D iuuport,4t NIOC, NIGC, NIORDK, ad other (sutors and uotsotonus)
Table2
Foreign Trade
Non-oil eports
port
Volume (weigh)
194
Value
werage value
lune
Valoe
lwerate vale
(thousand tons)
(mlho II$S)
($ per ton)
(thousand toe)
(million (I$
(tSS per ton)
avarda
5,067
2.287
4$1
1.925
1.97
1,028
Odhehes.ht
7.$4
3,106
43
694
4.79
1,16
hhordd
6,857
2.885
416
$.249
3,986
1,227
Li
$.874
2.982
43l
2.550
3,50
1,576
Mordad
6,16
2,754
436
2.647
,347
1.265
hahnivar
6.266
2.73
436
3.134
3,6$3
1165
Mehr
6.09
2.787
403
2976
3.224
L.03
Aha
7.2$8
',2%
719
2.%
3.042
1,10
Aaf
$.173
2.303
44
2.76
3,04
1 10
De
3,627
2,941
2
2.18
.676
1.424
ulna
6.$37
2,72
41
2.7+
4,24
1.12$
sfand
8,10s
3.289
406
3.907
4,413
1.129
Tonal
7,461
34,740
46f
44,069
41,490
1,1
Sorce. lam Republic of lmaa Customs Administration (preliary figures of 1394)
'ludes natural gas condos.ate
- 37 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
sfand
2019
'ed on original maturity
Echange Rate (USS/IRR
terhank market rat,
Pe all market rate
(average selling rate)
30.208
- 38 -

Ible f
Balance of Payments
nillion dollars)
elimin.ary
Nine month (preliminary)
1390
1391
1392
139
139
1394
Rwsslags slangs
$8.507
2342
26.440
LS,86l
16.86
9.993
4L.0
6.779
28.399
31.970
21.392
20.691
1,801
·43.0
porns (FOB)
14$.806
97.27l
93124
6,47l
69.08S
$0.38-4
-27.1
oil'
119.148
68.058
64.882
$$.352
4.891
27.09
-4L.0
None0
26.6$8
29,21
28,24
4119
231,194
23.291
0.4
lnper (FOD)
78.027
68.712
61.1$$
G$,079
48.394
38,58.
·-20.J
$.726
2652
3,i
1.94
2.7
I 711
-8.6
(hers
72301
66.660
$.044
61.13l
45.606
36.872
-19.2
-977
-7,367
-7,17
-6.98$
-4,999
-3,042
-9.1
9
1.66
1.066
4.
797
786
1.5
406
·10
$4f
511
o
40
74
-16,87$
·-6.664
-11.347
1,664
-4.5990
2.070
Lot and omnisn
-20.19
4.46
-1.703
-$,63$
-3.997
8.28$
108.6
21,436
12.21
13.18
$.561
8.322
3.7%8
-$4.7
value of rude oil oil products. natural gas. natural ga condensate. ad natural yaw liquids ( ariff Codes: 2709. 2I0 ad 271Deported by National Iranian Oil Company (NI0C), National lrarian
Gas Company (NI6Ci National lravian ti 4&fiig n4 Distribution Cowpary (NORD), petrochemical companies, ad others (eutons and nor-toms)
glue of oil products, natal gas. natural gas condensate. and naoral gas liquids (Larin Codes 270, 270 and 2711) imported by NIOC. NKC, NIORDC and others (atoms and now-custom)
Table2
Foreign Trade
Non-oil eports
port
194
Volume (weigh)
Value
werage value
lune
Valoe
lwerate vale
(thousand tons)
(mlho II$S)
($ per ton)
(thousand toe)
(million (I$
(tSS per ton)
avarda
5,067
2.287
4$1
1.925
1.97
1,028
Odhehes.ht
7.$4
3,106
43
694
4.79
1,16
hhordd
6,857
2.885
416
$.249
3,986
1,227
Li
$.874
2.982
43l
2.550
3,50
1,576
Mordad
6,16
2,754
436
2.647
,347
1.265
hahnivar
6.266
2.73
436
3.134
3,6$3
1165
Mehr
6.09
2.787
403
2976
3.224
L.03
Aha
7.2$8
',2%
719
2.%
3.042
1,10
Aaf
$.173
2.380
40#
2.76
3,04
1 10
Total
$,29
26,872
469
25,0
0,167
1,14
Sore. slams Republic of lraa Custont Admintraton (the prelnary figures of eleven months of 1394)
'eludes natural gas condensate
- 39 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
A4af
37
'ed on original maturity
Echange Rate (USS/IRR
Pe all market rate
(average selling rate)
A/a
30.00
- 40 -

Ible f
Balance of Payments
nillion dollars)
elimin.ary
Six months (preliminary)
1390
1391
1392
139
139
1394
Rwsslags slangs
$8.507
2342
26.440
LS,86l
12.7
6.136
-521
6.779
28.399
31.970
21.392
15.705
-12.0
7.342
porns (FOB)
14.806
97.27l
93124
6,47l
48.662
33.616
-30.9
oil'
119.148
68.058
64.882
$$.352
33.8$
20.06.$
-40.3
None0
26.6$8
29,21
28,24
4119
1s,067
1.551
.10.
lnper (FOD)
78.027
68.712
61.1$$
G$,079
32.9$7
26.073
·-20.9
$.726
2652
3,i
1.94
,86
f0
-12.2
(hers
72301
66.660
$.044
61.13l
31.070
24.988
-19.6
-977
-7,367
-7,17
-6.98$
-1,658
-2,281
-7.6
9
1.66
1.066
4.
397
'00
19.4
406
·10
$4f
511
251
280
11.
-16,87$
·-6.664
-11.347
1,664
.$2
·3.337
-8.4
Lot and omnisn
4.46
-20.19
-1.703
-$,63$
-2.934
4.922
$4
21,436
12.21
13.18
$.561
6.$28
1.$62
.%.
value of rude oil oil products. natural gas. natural ga condensate. ad natural yaw liquids ( ariff Codes: 2709. 2I0 ad 271Deported by National Iranian Oil Company (NI0C), National lrarian
Gas Company (NI6Ci National lravian ti 4&fiig n4 Distribution Cowpary (NORD), petrochemical companies, ad others (eutons and nor-toms)
glue of oil products, natal gas. natural gas condensate. and naoral gas liquids (Larin Codes 270, 270 and 2711) imported by NIOC. NKC, NIORDC and others (atoms and now-custom)
Table2
Foreign Trade
Non-oil eports
port
194
Volume (weigh)
Value
werage value
lune
Valoe
lwerate vale
(thousand tons)
(mlho II$S)
($ per ton)
(thousand toe)
(million (I$
(tSS per ton)
avarda
5,067
2.287
4$1
1.925
1.97
1,028
Odhehes.ht
7.$4
3,106
43
694
4.79
1,16
hhordd
6,857
2.885
416
$.249
3,986
1,227
Li
$.874
2.982
43l
2.550
3,50
1,576
Mordad
6,16
2,754
436
2.647
,347
1.265
hahnivar
6.266
2.73
436
3.134
3,6$3
1165
fatal
$7,921
16,467
44
17,199
20,8$2
1,212
Sores. lams Republic of lr Custom dmintraton (the prshnnary [iguns of ssvan month of 134
'heludes natural gas condensate
- 41 -

Eternal Debt'
Table3
tend of the month
(million dollar»)
Sharp+tern
Medure and long-tnm
Shahrivar
$.476
'ed on original maturity
Echange Rate (USS/IRR)
fable 4
erban manet rat
Parallel market rate
(average selling rate)
(average selling rate)
Shahrivar
29.94
34,25%

- 42 -

Annex 124
Central Bank of Iran, “Selected Economic Indicators, Balance of Payments”, Persian
Month of Azar 1397 (22 November 2018 – 21 December 2018)

- 43 -

- 44 -

Table2
Foreign Trade'
Non-oil exports
mpor1
19
Volume (wegho)
Value
Awerage value
«lune
Vale
lwerage value
(thous.ad tons)
(million 1+$$)
(Us$ per ton)
(thous.and tons)
(million I8$)
(tSS per ton)
farad
7.126
2,684
177
19
2529
.3o
ordihehes.ht
9.873
4.0$4
411
31.731
4.832
1.2$
hrdd
7.892
1,3122
4.
2,706
,891
1.438
Ti
8.930
3.526
39
3.181
3.926
1,234
Mortd
8.07
,62
42
2411
1,71
1,$41
Shahnva
9,872
3.$57
360
2.25$
3.289
1.4$7
Mehr
0,07
.777
375
2.709
4.120
1.$21
Aban
7,859
2.710
34°
2.56$
3.246
1,264
Art
1.67
3.9
291
2.37
31.072
124
Total
81,608
30.58.5
J7
23.871
32,620
1.67
Sours. blame Beptls of Iran Caston Administration (pr limna figs»)
±eludes natualga soden.ate
Eteral Debt'
Table
(end of the month)
hot-terr
Medrum- and long-term
Total
el/ion dollar llo sure
llion dollar
lion so
ullo dollar
lho no
19
Lt
3.14
2.788
6,860
6.026
10,034
8.814
'Hsed on original maturity
- 45 -

F change Rate (USS/IRR)
Int.rbaal let rats
Paralll malet rats
(average selling rate)
(average selling ate)
197
A/at
42.000

- 46 -

Annex 125
McKinsey Global Institute, “Iran: the $1 Trillion Growth Opportunity”, June 2016
Excerpts: pp. 1-4, p. 11

- 47 -

- 48 -

McKinsey&Company
MCKINSEY GLOBAL INSTITUTE
IRAN: THE $1 TRILLION
GROWTH OPPORTUNITY?
JUNE2016
gt4++++++++++++++
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INSIGHT
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- 49 -

MCKINSEY GLOBAL INSTITUTE
In the 25 years since its founding, the Mc Kinsey Global Institute (MGI) has sought to develop
a deeper understanding of the evolving global economy. As the business and economics
research arm of McKinsey & Company, MGI aims to provide leaders in the commercial.
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methodology examines microeconomic industry trends to better understand the broad
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have covered more than 20 countries and 30 industries. Current research focuses on six
themes: productivity and growth, natural resources, labour markets, the evolution of global
financial markets. the economic impact of technology and innovation, and urbanisation.
Recent reports have assessed the economic benefits of tackling gender inequality, the
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MGI is led by three Mc Kinsey & Company directors: Jacques Bughin, James Manyika, and
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Copyright O McKinsey & Company 2016
- 50 -

IRAN: THE $1 TRILLION
GROWTH OPPORTUNITY?
JUNE2016
Richard Dobbs I London
Homayoun Hatami I Paris
Tera Alias I London
Saba Arab I London
Arsalan Mahtafar I New Jersey
- 51 -

PREFACE
Prospects for Iran's economy are attracting widespread attention following
implementation in January 2016 of a nuclear accord between Iran and the
United States, the European Union. China. France, Germany, Russia. and
the United Kingdom, and the subsequent easing of international sanctions.
Numerous business and government delegations have been visiting Tehran
and other cities to size up the potential opportunities and to sign deals
and commercial agreements. Iran for years was largely cut off from the
globalisation trends that have supported growth around the world. With some
of the sanctions lifted. the country now has an opportunity to reconnect with
the global economy, but many questions remain. How big is that opportunity,
for ran, and for the global economy? How could both Iranian and international
companies capture it? And what measures would Iran need to adopt in order
to help usher in a new era of prosperity?
This report discusses the strengths and challenges of Iran's economy and its
potential over the next two decades to 2035. It is the fruit of several months of
in-depth research, including an examination of key sectors of Iran's economy
ranging from oil and gas to fast-moving consumer goods, agriculture, and
information and communications technology. We find that Iran has the
potential to add $1 trillion to GDP and create nine million jobs by 2035.If it is to
realise this potential. Iran will have to put in place key enablers of rapid growth,
including measures to increase the attractiveness of the country to foreign
investors, ensure macroeconomic stability, strengthen and deepen its financial
system and its international connectivity, raise productivity, and upgrade its
industrial infrastructure.
Whilst the political environment and stability are important to economic
outcomes. we do not comment on politics in this report.
The analysis was led by Richard Dobbs, a McKinsey and MGI director
based in London, and Homayoun Hatami, a McKinsey director based
in Paris. Tera Alias, an MGI visiting fellow in London, headed the project
team, which was directed by Saba Arab and Arsalan Mahtafar and
comprised Julian Buckner. Samuel Byrne, Maggie Desmond, Alistair Fernie,
Owen Gallogly. Sajad Goli, Babak Hashemi, Amir Hosseini, Arnir Ali Motahari,
Juan de Francisco Rasheed. Kevin Russell, Ata Seifi, and Pegah Soltani.
Peter Gumbel, senior MGI editor, and Matt Cooke, director of MGI external
communications, also contributed to this report, for which Marisa Carder,
Julie Philpot, Margo Shimasaki, and Patrick White provided editorial support.
- 52 -

EXECUTIVE SUMMARY
International sanctions against Iran were partially lifted on January 16, 2016, following
irnplernentation of a nuclear agreement between Iran and the United States, the European
Union, China, France, Germany, Russia, and the United Kingdom. But international
business and government delegations began arriving in Tehran even before Implementation
Day. Germany's economy minister took a group of business executives to lran in July
2015. Russian President Vladimir Putin visited four months later. About 100 French CEOS
went in February 2016, and Italian Prirne Minister Matteo Renzi headed a delegation of 60
business leaders in April 2016. Meanwhile, Iranian government representatives have been
travelling the globe to discuss opportunities for international investment. In January 2016,
President Hassan Rouhani led business delegations to France and Italy, where commercial
agreements worth several billions of dollars were signed.
The nuclear agreement marked a turning point for Iran, with implications for the global
economy as a whole. For the past two decades, Iran's trade and financial ties with rnuch
of the rest of the world have been subject to international sanctions that largely isolated its
economy and contributed to uneven growth. In that period, it missed out on the productivity
improvement and globalisation wave that has supported growth around the world. In 1989,
Iran's economy was on a par with Turkey's in absolute terms; in 2014, it was about half the
size, with a GDP of $415 billion and GDP per capita 0f $5,400 in nominal terms. Adjusting for
purchasing power, Iran's economy in 1989 was 50 percent larger than Turkey's; in 2014, at
$1.4 trillion, it was slightly smaller.
Iran has an opportunity to increase GDP by $1 trillion
and create nine million jobs by 2035.
More than
The lifting of sanctions by the United Nations and European Union gives the country an
$130%
opportunity to reconnect with the global economy and make up for the lost opportunity.
although US primary sanctions remain in place. Expectations in lran and in the international
business community are high. In the ten months since the nuclear agreement was adopted
in July 2015, preliminary business deals with global companies worth at least $130 billion
have been announced (for details see the annex at the end of this report). But many
Value of
international deals
signed since
nuclear accord
questions remain. How might domestic and international businesses capture the growth
opportunities? Which sectors will likely be the engines of growth? And what steps will the
government need to take for Iran to realise its potential?
In an attempt to answer these questions, we have conducted in-depth research on 18
sectors that will be sources of GDP growth and employment. They range frorn oil and gas
and automotive to retail. information and communications technology, and infrastructure.
We have also interviewed economic experts and business executives inside and outside
Iran to analyse its underlying strengths and identify key challenges.
- 53 -

- 54 -

Annex 126
Iranian Parliament, Sixth 5-Year Economic, Social, and Cultural Development Plan
Act of the Islamic Republic of Iran (1396-1400) (21 March 2017-20 March 2022),
Articles 3 and 4

- 55 -

- 56 -

An Excerpt from the Sixth 5-Year Economic, Social, and Cultural Development Plan Act of the
Islamic Republic of Iran {1396-1400)
Section 1 - Macroeconomics
Article 3: In order to achieve an average annual growth rate of 8% and a Gini coefficient of 0 .34 at the
end year of the Plan, the quantitative targets for macroeconomics and economic sectors are set out in
Tables 1, 2, and 3:
Table No. 1 -- The Image of Significant Macroeconomics Indexes during the 6" Plan
Base
Average during
No.
Index
Unit
Year 1396
1400
the 6" Plan
(1395)
(percent)
Gross Domestic
Thousand-billion-
( average annual
1
rial to the fixed
2095 2256
3078
Production
price in 1383
growth) 8
Million rials per
( average annual
2 GDP per capita
person to the fixed
26.1
27.8
36.1
growth) 6.7
price in 1383
3
Total Factor
Index (1395=100)
(average annual
100
102
115
Productivity
growth) 2.8
Gross Fixed Capital
Thousand-billion-
( average annual
4
rial to the fixed
440
4695
1160
Formation
price in 1383
growth) 21.4
Total Consumption
Thousand-billion-
(average annual
5
rial to the fixed
1197
1263
1524
Expenditures
price in 1383
growth) 5
Non-oil Exports of
Goods and Services
Million-dollar
6
(average annual
42150 47583 112739
(Excluding Natural-
growth) 21.7
gas Condensate)
7
Total Import
Million-dollar
69967 86557 152497
(average annual
growth) 16.9
8
M2
Thousand-billion-
13003
(average annual
15604 28508
rial
growth) 17
9
Inflation Rate
Percent
7.9
8.3
7.9
(average during
the Plan) 8.8
10
Employment-to-
Percent
(average during
12.6
12
8.6
population ratio
the Plan) 10.2
Table No. 2: The Image of Economic Variables of Economic Sectors during the 6 Plan (percent)
>
',;I
=
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= z3 2
z 5.5
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=
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° z.
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0
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Average annual growth of
8.0 7.0
8.8 9.3 9.0 7.5 8.3
the added value (percent)
Average annual growth of
3.9 2.1 4.6 3.4 6.6 3.7 5.0
19.4
5.8
8.0
Employment (percent)
9.5
4.3
3.9
Average annual growth of
Mining &
26.
2.3 39.5
Industry
30.2
22.6 51.8
investment (percent)
18.1 21.5
5
26.1
Average annual growth of
Total Factor Productivity
3.2
1.8 2.4 2.0 2.0 2.8 2.1
6.5
0.8 2.8
(percent)
- 57 -

An Excerpt from the Sixth 5-Year Economic, Social, and Cultural Development Plan Act of the
Islamic Republic of Iran {1396-1400)
Table No. 3: Annual Investment Financial Resources of the 6" Plan in terms of the Different
Financing Methods -- Thousand-billion-rial
Average during
Portion in the
1395 1396 1400
6" plan
the Plan
(percent)
Acquisition of Capital Assets
575 627
1470
996
12.9
Bank Loans for Investment
1202
1430 2575
1900
24.7
National Development Fund
362 379.5 928
714
9.3
Capital Market
400 488
1481
956
12.4
State-owned Companies and
Institutions, and Non-governmental
603 712
1231
957
12.4
Public Entities
Equity Financing
144
171
309
228
3.0
Foreign Financing and Investment
62.5 299
1575
1955
25.3
Total Financing Resources of the 6
3349 4108 9569
7706
100
Plan
Article 4: In order to provide at least 2.8% of the 8% economic growth from the promotion of the Total
Factor Productivity, as well as an average annual investment growth of 21.4% during the
implementation years of the Plan, all executive agencies [shall] take the following actions in
coordination with the government. The government is responsible for the implementation.
a- [Taking] the necessary orientations and policies to secure the financial resources required for
investment, including providing foreign financial resources up to an annual average ofUSD 30
billion from the foreign banks' credit lines in the form of project financing with the priority of
Islamic finance, USD 15 billion in the form of foreign direct investment, and USO 20 billion
[in the form of] joint ventures with foreign companies.

- 58 -

Annex 127
World Bank Group, “Iran Economic Monitor – Sustaining Growth: the Challenge of
Job Creation”, 2017

- 59 -

- 60 -

IRAN ECONOMIC MONITOR
SUSTAINING GROWTH: THE CHALLENGE
OF JOB CREATION
Fall 2017
- 61 -

Table of Contents
Preface
111
Executive Summary...
iv
I. Recent economic and policy developments.
A. Output and Demand ..
B.
Jobs and Labor Market..
5
C. Public Finances
7
D. Monetary Policy and the Financial Sector...........8.88888888888008880888088008ooo...... 8
E. Extemal Position
I 0
11. Outlook and risks
13
SPECIAL FOCUS: RECENT TRENDS IN EMPLOYMENT AND LABOR MARKET OUTCOME .
.... 15
I.
lntroduction: Linkages between economic growth and employment
15
2. The Challenge of Labor Market Participation and Unemployment ................................... 18
2.] Employment Trends ..........so...so.....o..ooooo
.22
2.2 Sectoral Employment Trends ............so..so.so.so.ooooooo
.2
3. Hypothesized constraints to employment and job creation...
27
4. Conclusion
29
References
... 31
- 62 -

List of Figures
Figure 1:
GDP growth decomposition
1
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6:
Figure 7:
Figure 8:
Oil and gas sector composition . ..
..
1
Labor force participation, employment ratio and unemployment rate
6
Actual performance compared to approved budget
7
Exchange rate depreciation and CPI inflation
8
Current account balance, exports and imports
11
Iran's top 10 import partners
11
Real Effective Exchange Rate index (CPI based, quarterly, 2010=100) and Non-oil exports ...
(as a% of non-oil GDP)
11
Figure 9:
Figure 10:
Figure 11:
Figure 12:
Figure 13:
Figure 14:
Figure 15:
Figure 16:
Figure 17:
Figure Bl:
Real Non-Oil GDP and Employment in Iran
15
Employment-growth elasticities, 2003-13
16
Labor Force Participation, Employment, and Unemployment Rates
17
Labor force participation rates, Iran and comparator countries, 2013... .
..
17
NEET Rates(%), 2013
20
Labor Force Participation and Unemployment Rates by Gender
21
Occupational Distribution of Employed Women..........................
..
23
Enrollment in Higher Education by Gender, 2006-2015 (Thousands)
24
Shares of Small, Medium, and Large Firms in Total Manufacturing Employment..
...... 26
Real GDP growth based on the old and new series (2005-2015)
3
List of Tables
Table 1:
Table 2:
Table 3:
Islamic Republic oflran: Selected Macroeconomic Indicators (2014-17) *
5
Iran's Non-oil Export Destinations
12
Labor Market Trends for Women and Men 10 Years and Older in Iran
19
Table 4: Share of Agriculture, Industry, and Services Sectors in Total Employment in Iran
25
Table 5: Number of Firms in Different Size Categories
26
Table B 1.1: Gap between the nominal GDP components of the two series (production side)
3
Table Bl.2: Gap between the nominal GDP components of the two series (expenditure side)
4
List of Boxes
Box 1: CBI's new national accounts series
............................................................... 3
11
- 63 -

PREFACE
The Iran Economic Monitor provides an update on key economic developments and policies over the past
six months. It examines these economic developments and policies in a longer-term and global context, and
assesses their implications for the outlook for the country. Its coverage has ranged from the macro-economy
to financial markets to indicators of human welfare and development. It is intended for a wide audience,
including policy makers, business leaders, financial market participants, and the community of analysts and
professionals engaged on Iran.
The Iran Economic Monitor is a product of the World Bank's Global Practice for Macroeconomics, Trade
and Investment team. This fourth issue was prepared by Kamer Karakurum-Ozdemir (Senior Economist,
Task Team Leader) and Majid Kazemi (Economist), under the general guidance of Kevin Carey (Global
Practice Manager) and Saroj Kumar Jha (Country Director). The Special Focus was prepared by Jumana
Alaref(Social Protection Economist) and Johannes Koettl (Senior Economist, GSP05), under the guidance
of Hana Brixi (Practice Manager) and was based on a report authored by Hadi Salehi-Esfahani (University
of Illinois at Urbana-Champaign). Janet Minatelli (Senior Country Officer) provided helpful comments.
Muna Abeid Salim (Senior Program Assistant) formatted the report. The team is grateful to the Government
of Iran for its contributions to this publication.
The findings, interpretations, and conclusions expressed in this Monitor are those of World Bank staff and
do not necessarily reflect the views of the Executive Board of the World Bank or the governments they
represent.
For questions and comments on the content of this publication, please contact Kamer Karakurum-Ozdcmir
([email protected]) or Majid Kazemi ([email protected]). Questions from the media can
be addressed to Mona Ziade (mziade @worldbank.org)
Ill
- 64 -

EXECUTIVE SUMMARY
Growth performance in 2016 exceeded expectations based on the bounce back in oil production and
exports. The economy registered a record growth rate of 13.4 percent according to the new GDP data
published by the Central Bank of Iran.' While Iran's economy is relatively diversified for a resource-rich
country, oil proceeds still play a crucial role in public finances and external accounts. Iran's ability to
increase production in 2016, despite the cuts agreed to by the rest of the OPEC members helped bring
production near its pre-sanctions levels. The surge in exports led to an improvement in the current account
surplus, to 3.9 percent of GDP in 2016, as growth in imports remained stagnant. Increased oil production
and exports brought an increase in government revenues, however, the improvement was not enough to
offset the widening expenditures; the fiscal deficit grew from L7 percent in 20 I5 to an estimated 2.2 percent
in 2016. Creating fiscal space for growth will be important especially in view of the expected burden from
securitization of government arrears and growing pension system liabilities. Iran managed to achieve single
digit inflation in 2016, but inflationary pressures resurfaced towards the end of the year and in early 2017,
as liquidity rose and the Iranian Rial continued to depreciate. Job creation remained limited.
In the medium-term, the growth rates are expected to revert to an average of 4 percent, reflecting modest
reintegration with the global economy in banking, trade and investment. Despite recent signals from
European banks for engaging with the Iranian banks, FDI inflows to Iran remain restrained. At the same
time, recent developments suggest that the non-oil sector and private investments arc likely to play a bigger
role in the next few years, bringing growth to an average of 4 percent in 2018-19. This positive growth
outlook still hinges on the assumption that some of the agreements between Iran and major foreign
companies in the oil and gas and other key sectors, including manufacturing, will materialize. This would
create renewed confidence, validating the positive expectations generated in the immediate aftennath of
JCPOA implementation in January 2016 and leading to gradually improving medium- to long-term growth
dynamics as potential output starts to rise.
There are significant downside risks, both domestic and external, to this moderate medium-term outlook.
Re-election of President Rouhani in May 2017 for a second four-year term provides the conditions for
continuity in reform efforts, despite a significant change in the members of his government. Yet, concrete
measures are yet to be taken to address the priority areas in the sixth 5-year development plan. Sustainability
of growth hinges on increased investment in the economy, that will modernize and increase production
capacity in the oil and particularly gas sectors and most importantly boost non-hydrocarbon sectors.
Inclusiveness of growth through creating jobs for all segments of the society and through creating a level­
playing field for existing and new firms will require improving the business environment and the efficiency
of labor markets. The major external risk in the near future is the prolonged discussions around the future
of the JCPOA and the US policy towards new sanctions on Iran, which directly influence investor
confidence and lead to delays in actual investment inflows to Iran. Furthermore, lower than projected oil
prices would put pressure on government revenues and undcnnine growth.
The years in this note refer to Iranian calendar year, which muns from March 21 to March 20 of the following
Gregorian year. For example, 2016Q1 in this text refers to the first quarter of the Iranian calendar year 1395 (April­
June).
IV
- 65 -

I. RECENT ECONOMIC AND POLICY DEVELOPMENTS
A. Output and Demand
GDP growth reached 13.4 percent (at market prices) in 2016. Headline economic growth surpassed
initial estimates and reached a 25-year high in 2016 mainly due to a quick recovery in oil production
(Figure I)'The impressive growth outcome occurred after the economy had grown at a negative rate not
only in real terms but also in nominal terms a year earlier due to the lingering effects and financial sector
disruption, as well as the cumulative effect of sanctions. Growth picked up through 20 I 6; the second
half of 2016 was especially strong, with y-o-y growth of more than 14.8 percent (ending March 2017)
as oil production accelerated. Non-oil growth recovered to its highest rate in five years, from a 3.1
percent contraction in 2015 to 3.3 percent growth in 2016 as both services and overall non-oil industry
sector growth tumed positive. In 2016, real GDP rose 5 percent above the historical peak of 2011 while
real non-oil GDP reached marginally above its highest level in 2014.
Figure 1: GDP growth decomposition
Figure 2: Oil and gas sector composition
20%
100%
80%
10%
60%
40%
0%
20%
-10%
0%
Oil and gas
Industries and mining
Agriculture
Services
38885
o et
e «t u
8 8888 8
ee4 et
GDP growth
e4et e e
et e
■ Crude Oil ■ Gas
Petroleum products
Source: Based on CBI data.
Source: Based on CBI data
As crude oil reaches its current production ceiling, Iran has started expansion of gas production and
exports. The country s real oil and gas value added grew by an impressive 62 percent in real terms during
2016. OPEC reports indicate that in August 2017 crude oil production reached 3.83 mbpd, up from 2.8
mbpd in 2015. The authorities plan to increase production to 4.5 mbpd in the next five years based on
the sixth Five-Year Development Plan (FYDP) goal. Two factors arc expected to limit further expansion
of crude oil production. First, production is almost at full capacity levels and investment in future
production capacity increases docs not appear to be taking place yet, despite the various initial
agreements with large foreign investors. The second factor is the ongoing OPEC+ (OPEC plus
12.5 percent measured at factor cost.
The CBI has published a new base year (201 1) national accounts series. This has resulted in some revisions to
growth rates from the previous version of this report. The old series reported growth rates of 5.4 and 9.2 percent
for QI and Q2 2016 whereas the new series growth rates are 7.5 and 12.9 percent for those two periods.
OPEC Monthly Oil Markets Report. September 2017.
http //w opec.org/opec, web/static files project/media/downloads/publications/MOMR%20September%2
[2017 pdf
- 66 -

cooperating non-members) agreement which is expected to be extended beyond the current expiration
of March 2018. In this environment, the govemment has recently focused on expansion of gas
production. Based on BP's recent annual report, 'Iran now possesses the biggest share of officially
proven gas reserves in the world (18 percent) overtaking Russia (17.3 percent). The gas production's
share in the overall oil and gas sector has steadily increased in the past decade (Figure 2). Until recently,
the majority of the increase in production was absorbed by the domestic market.'However, the National
Gas Company has announced that Iran's gas exports grew by around 64 percent between March to
August 2017, mainly due to initial gas exports to Iraq, which are planned to increase significantly in the
coming years.
Non-oil GDP growth has not been adequate to dent unemployment. While non-oil growth recovered
in 20 I 6, this followed a large contraction in the previous year and fell short of improving the long­
standing unemployment problem. In the 6 years up to 2011, non-oil value added had grown annually by
around 5 percent on average but the growth rate declined to less than I percent per annum between 2012
to 2016. Amongst the different components of the non-oil sector, industry and mining contributed the
least, which reflects the productivity-dampening effect of sanctions and constraints on investment in
these sectors. Between 2005 to 2011 almost 2 percent of overall annual non-oil growth was attributed to
the industries and mining sector. Since 2011, the sector's contribution has fallen to -0.34 percent. As a
result, in 2016 this component of non-oil GDP was almost the same size as it was 5 years ago.
Unemployment is also related to the sector composition of growth (sec Special Focus chapter)
The biggest contributor to the weak performance of the industrial sector has been the construction
sector, which is highly cyclical due to the dynamics in the financial sector and public investment. The
construction sector has remained in recession in the past 5 years, leading to a decline in its value added
to only 62 percent of what it was in 2011. The downturn in this sector can mainly be associated with the
housing market problems where a decline in the speculative demand amidst political and economic
uncertainty have weighed in on growth. Furthermore, the increase in the years prior to 2011 had been
especially strong due to the initiation of the Mehr housing program which alongside high real interest
rates in the banking sector since 2013 redirected money away from the housing sector towards bank
deposits. In addition, the lack of investment in the construction sector has occurred not only through a
decline in private investment but also by an equally sized negative growth (-7 percent) in government
investment in 2016 as the government tried to curtail the fiscal deficit.
In 2016, the surge in oil exports overwhelmingly led growth on the demand side, while investment
and consumption demand were yet to fully recover. In 2016, total exports grew by a staggering 4L.3
percent as a result of the increase in oil exports following the sanctions relief being implemented from
January 2016. Growth in imports of around 6.1 percent was substantially more moderate and failed to
offset the large 20.2 percent contraction in 2015. While weak investment performance has been a key
factor behind the moderate increase in imports, policy measures also played a role. For example,
according to the high-level directives issued aimed at reducing "import dependence"since January 2017,
the online portal of the Ministry of Industries website that was previously used to file car import
certificates has stopped accepting new requests until further notice.
Consumption demand growth,
though recovering to around 3.8 percent, has also not been enough to move real consumption
8
See, BP Statistical Review 2017.
6
The increase in gas exports is especially significant despite the halting of gas imports by Turkmenistan after a
pricing dispute in January 201 7.
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2
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expenditures beyond the recent years peak levels. This emphasizes the uneven nature of the economy's
recovery in 2016 which is yet to be adequately addressed.
Box 1: CBI's new national accounts series
Since the last issue of the Iran Economic Monitor, IEM (Spring 2017). the CBI released a new series of national
accounts data based on the new 2011 base year. The tables and data in this issue of the IEM use the new series.
The new series is currently available for the 2004-2016 Iranian fiscal years. The main difference in the series
has been the base year change from 2004 10 2011 based on updated relative weight of different sectors in overall
real GDP. The new weights reflect a more up to date price of basket of consumer and producer used goods and
services. While this has clearly impacted the real GDP growth rates. changes in nominal values reflects use of
additional data and newer methodologies used in the calculation of national accounts data.
The previous data series covered the years 1959 to 2014. with the data for 2011-2014 being released as
preliminary figures.'
Figure BI: Real GDP growth based on the old and new series (2005-2015)
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0% 2005 2006 2007 2008 2009 2010 201
-4.0%
-6.0%
-8.0%
-10.0%
2011 (New) 2004 (Old)
Source: CBI
The new series introduced adjustments to the nominal values in all major subcategories. The below table
illustrates that apart from services which has seen marginal downward adjustments, the majority of the revisions
to the other components and overall GDP are positive for other main GDP components on the production side:
Table BI.1: Gap between the nominal GDP components of the two series (production side)
% adjustment
compared to old
series
2004
2005
2006
2007
2008
2009
2010
2011
2012
201.3
2014
oil and Gas
0.0
-0.1
0.2
2.2
4.I
8.9
11.1
-10.7
-13.7
5.1
-6.9
Agriculture
0.0
0.0
0.0
0.5
-0.6
-0.4
-5.1
07
0.2
14.8
II 6
Industries and Mines
178
17.4
16.5
1$.5
14.8
14.6
1$4
24.6
23.1
19.6
220
Services
-0.3
-0.5
-0.5
0.0
-0.5
-0.5
-0.6
-0.9
-1.8
-2.6
-IL.I
Total GDP
3.5
3.0
3.0
3.7
3.8
44
5.0
1.8
2.7
$.4
44
Source: CBI
9 The only other data point that was reported based on the old base year was overall GDP growth for 2015.
3
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The group with the highest adjustments has been the industries and mines sector with adjustments of more
than 14 percent of the old series for each year. This might to some extent reflect a more accurate methodology
of factoring in of the informal sector in the 2011 base year data.
On the expenditure side, the largest downward adjustments for the outer years are reported for net exports and
consumption which suggest a larger impact of the challenges in these key components during the sanctions
period. However, these downward revisions have been more than offset by increases in inventory values.
Table BI.2: Gap between the nominal GDP components of the two series (expenditure side)
% adjustment
compared to old
series
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013 2014
Consumption
-0.6
-0.5
-0.6
-0.4
-0.3
-0.5
-0.6
-0.6
-I4
-4.0
-3.7
GFCF
2.4
3.0
4.5
l.3
5.0
4.2
3.3
5.4
3.9
-0.3
3.9
100
Inventories
23.5
38.9
3$.1
30.0
34.4
46.6
4l2
16.8
16.4
1671
2
Net Exports
0.4
0.0
0.8
2.6
3.4
4.
11.5
-9.9
-44.2
-92.9
-66.8
Source: CBI
Gross capital formation continued to contract for the sixth consecutive year as the impulse from
sanctions relief was insufficient to overcome structural constraints on investment. Despite great
anticipations for an influx of cash and investment into the economy after the JCPOA, actual investment
failed to meaningfully kick-start in 2016 due to political uncertainties including the presidential elections
in Iran and the US and the persistent effects of previous boom-bust cycles in investment. Total
investment declined by around 3.7 percent (declining to 20 percent as a share of GDP) as a result of
contractions in total construction investments and public investment in machinery. However, more
recently there has been more positive signals for an increase in investment expenditure. In July, the
country signed a US$4.8 billion deal with an energy consortium led by the French company Total for
developing the South Pars gas field, which was followed by an agreement of Euros I billion with
Austria's Oberbank for financing of export credit lines. Other lines of credit agreements were also signed
with Belgium, China, Denmark, Germany, Italy, Korea and Russia for projects especially in
infrastructure and energy sectors
10
These recent agreements, if fully operationalized, can jump-start the
growth of the non-oil sectors contributing towards a more sustainable growth in the coming years.
10
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billion-finance-deal, https://financial(tribune com/articles/economy-business-and-markets/72826/iran-signs­
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signs-1-6-billion-deal-to-modernize-iran-oil-refinery-idUSKBN]AMO76
https://financialtnibune com/articles/economy-business-and-markets/7I089/framework-agreement-signed-for­
s-korean-finance,http://koreatimes co kr//nesbiz/2016/06/488 203988 html
4
- 69 -

Table I: Islamie Republic of Iran: Selected Macroeconomic Indicators (2014-17)
(% change unless stated otherwise)
2014
2015
20161
20171
Real GDP, at factor cost (2011=100)
3.2
-1.6
12.5
3.5
Agriculture
5.4
4.6
4.2
4
Industry
5.1
-14
24.7
4.6
Services
14
-2.3
3.6
2.3
Real non-oil GDP, at factor cost (2011=100)
3.0
-3.1
3.3
n.a.
Real GDP, at market prices (2011=100)
4.6
-1.3
13.4
3.6
Private Consumption
2.0
-3.5
3.8
3.4
Government Consumption
4.2
4.8
3.7
3.8
Gross Fixed Capital Investment
7.8
-12
-3.7
1.7
Exports, Goods and Services
72
12.1
41.3
7.1
Imports. Goods and Services
-4.5
-20.2
6.I
6.0
Prices
Inflation (Consumer Price Index)
15.6
1L.9
9.0
11.5
Current Account Balance (% of GDP)
3.
2.3
3.9
4.1
Fiscal Balance (% of GDP)
-1.
-1.7
-2.2
-2.2
Iranian calendar years, running from March 21 to March 20 of the following year.
jedustry includes the oil and gas sector.
Sources: Government data and World Bank staff calculations.
B.
Jobs and Labor Market
The unemployment rate declined to 11.7 percent in the second quarter of 2017, following a rising
trend in 2015.16.' The recent easing in the unemployment rate took place despite an increase in the
labor force panicipation rate (LFPR) to 41 percent (a rate last seen in 2007) from 40.4 percent in the
same period of 2016. In 2016, while the adult labor force ( 15 years and older) grew by I. I million, the
economy managed to generate about 0.6 million net additional jobs. As a result, 470,000 people joined
the ranks of the unemployed and the rate of unemployment rose noticeably from 11.5 percent in 201404
to 12.5 percent in 2016Q4 and even edged up to 12.6 percent in the first quarterof2017, before declining
to I I. 7 percent in the second quarter. The govcmmcnt has implemented a series of measures to improve
participation and job creation, including improving applied skills of new university graduates and social
security contribution waivers for businesses employing new graduates.
Despite the recent increases, labor force participation (LFP) rates remain low in Iran, particularly
for women and youth. Disaggregation of labor force by gender and age reveals stark differences. Almost
64 percent of men aged IO+ participated in the labor market in 2016, while the participation rate for
women was only 15 percent, lower than the already low MENA average at 20 percent. Between 2005
and 2013, the LFP rates for both genders, particularly amongst youth, witnessed a dramatic decline.
Women aged 25-29 participate the most in the labor market when compared to other age groups.
However, the drop in women's LFP rates prior to 2013 affected all age groups and contrary to the case
of men, it was much more pronounced in the middle of the age distribution. The drop for both genders
'' The labor force in Iran is the population I0 years of age or above.
5
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seems to have halted in the last few years, although it did not recover to its 2005 levels. In addition, the
share of adults who arc not in employment, education or training (NEET) is high among youth,
especially among women. More than a third of youth (aged 15-24) were not in employment, education
or training in 2013.
The profile of LFP rates for men and women
also differs in rural and urban settings. The LFP
Figure 3: Labor force participation, employment
ratio and unemployment rate
Labor F oree Participation, Employment, and Umeploy rent Rte
(4Quarter Mooing Awcrages
l
j
rates for men aged 30-44 have remained stable
over the years in both urban and rural settings.
For women, however, the decline in participation
between 2005 and 2014 is quite large in rural
areas. In fact,
in 2005, a third of female
employment in the economy was in agricultural
I
fol LIPR 16»
fol glyretie IO
-
fettle.yet e 6
activities. This share declined to less than 22
percent in the mid-2010s.
$body efo
,--,n-•••-----
While the demographic window of opportunity
remains open,
-
--
increasing labor force
'
• 200$ 606 2001 260 200 2610 2011 2612 2013 2014 261$ 2016 261
e
participation will be critical to ensure Iran is
prepared for the aging challenge ahead. Due to
the remarkable drop
in fertility, the age- source: SCI tabor force survey.
dependency ratio'«was more than halved
between 1980 and early 2000s. The ratio will remain at this low level for the next three decades, when
it will start to climb back up -due to increasing aging of the population. If current trends continue, Iran
will start to age drastically by 2050 with the share of elderly (65+) reaching a quarter of the total
population. Only a limited portion of the working age population joins the labor force in Iran, hence,
until now it has not been able to take full advantage of the "demographic window of opportunity." It
will be critical to raise labor force participation rates in the coming years not only to propel economic
growth but also to prepare for the aging challenge ahead. Removing barriers to labor force participation,
addressing labor market rigidities, and improving relevance of skills arc potentially critical in ta.king full
advantage of the demographic window of opportunity. The special focus section below provides a more
detailed look at the recent trends in the labor markets and explores possible explanations for the weak
link between economic growth and job creation.
12
Age dependency ratio is the ratio of dependents--people younger than I5 or older than 64 - to the working-age
population - those ages I5-64. Data are shown as the proportion of dependents per 100 working-age population.
6
- 71 -

C. Public Finances
Figure 4: Actual performance compared to approved budget
The central government budget deficit,
as a share of GDP, widened in 2016, as
the pace of expenditure growth more
lttull
120%
than offset the growth in revenues.'
100%
The government deficit increased from
80%
60%
1.7 percent in 2015 to around 2.2
percent
in 2016. The
increase
is
40%
20%
significant especially
in light of the
0%
double-digit growth of the GDP in 2016
as well as declining inflation in 20 I 6.
Government revenues and expenditures
Sources: Government data and World Bank staff calculations.
increased by 22.6 and 25.6 percent'
respectively, significantly higher than
the previous two years. Consequently,
the government revenues as a share of
GDP reached 16.7 percent the highest
level since 2011 when global oil prices were at their historical peak. The biggest contributor to the rise
in 2016 revenues was tax revenues, accounting for more than half of total growth in government income.
The increase in tax revenues seems to be mainly associated with better enforcement, improved
monitoring and use of more efficient tools in determining tax policy and collection. No significant
change in tax rates such as VAT and income taxes were implemented in 2016. Nevertheless, actual total
revenues fell short of the amount envisaged in the budget (by 7 percent) while oil and tax revenues were
very close to their targeted amounts (Figure 4). In fact, tax revenues increased to 7.7 percent as a share
of GDP which is the highest share in the past 25 years.
Fiscal performance did not improve in the first quarter of 2017 as current expenditures have
increasingly dominated government spending. On the expenditure side, the authorities managed to keep
spending below the initial approved budget (actual total expenditure was 92 percent of the approved
budget amount). Nevertheless, the operating balance (current revenues net of current expenditures) has
surpassed the projected level, which partly highlight the challenges the government has faced compared
to the previous years. The current expenditure pressure has come at the expense of capital expenditures,
which has consistently fallen short of target levels. Data for the first quarter of 2017 show that current
revenues declined by 5 percent compared to the same period in 2016, while current expenditures
increased by 23 percent which has resulted in the widening of the overall balance. At the same time, the
share of capital expenditures, while above the 2015 levels, remains lower than the same period in 2014
despite the removal of sanctions.
The share of oil revenues in the first quarter of 2017 edged up but volatile oil prices are expected to
put further pressure on the government budget. Oil revenues as a share of total government revenues
continued to reduce and stood at 33.5 percent in 2016. However, the increase in oil exports in 2016 is
also expected to lead to an increasing share of oil revenues in total government revenues in 2017. In the
first four months of 2017, oil revenues increased by almost I50 percent compared to the same quarter in
13
For an overview of the allocation of oil and gas revenues see the Spring 2016 issue of the Iran Economic
Monitor.
14
Government revenues is defined here as the sum of current revenues (tax and other) and disposal of nonfinancial
assets. Similarly, total expenditures is the sum of current expenditures and development expenditures as defined
by the CBI.
7
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2016. This increase has pushed up the share of oil in government revenues back to almost 40 percent
(roughly double the share a year before). World oil prices remained sluggish until October 20 I 7,
constraining the path of recovery.
The government continued the securitization of public debt and arrears in 2016 and 2017. The
government has signaled its continued commitment to honoring its debt and arrears by expanding its
new debt issuance program in 2017. Debt instruments have become more diverse and instruments
including treasury bills, participation bills and Islamic bonds (Sukuk) have been more extensively issued.
In 2016 alone, the government sales of Islamic financial instruments more than quintupled reaching 538
trillion rials (equivalent to US$17. I billion). This policy is helpful in allowing the lenders to the
government to liquidate their receivables. It would especially help the producers, who have long suffered
from lack of cash flows after participating in government projects, to be able to reinvest the proceedings
in new productive activities. This sudden expansion has however highlighted the need for a more
comprehensive capital market mechanism, strong public debt management and better coordination with
the CBIs efforts in banking sector reform in reducing lending rates. The government reports suggest
that it has continued to pay principle and interests of all bonds issued and has had no additional arrears.
This dynamic was also essential to banks' recapitalization and injection of 170 trillion loans to
unfinished projects and companies operating at suboptimal capacity.
D. Monetary Policy and the Financial Sector
Inflation declined to 9 percent in 2016, the lowest level in 25 years, likely marking the end of
disinflation. CPI inflation remained below 10 percent (year on year) in the first ten months of 2016. The
biggest contributor to inflation during this period were the food and beverages sector. Food and
beverages prices picked up in the last quarter of the year (Jan-Mar), reaching almost I8 percent year
over year and continued its upward trend to almost 20 percent in April 2017. This raised annual headline
inflation in April to 12.6 percent, a level that was last recorded in August 2015. The increase in food
prices can mainly be attributed to the increase in global commodity prices in this period. Since then food
prices have cased to 14 percent year over year in July 2017. Health and education arc the other two
sectors where prices resisted falling below the I0 percent mark between April 2016 to July 2017
The recent increase in prices in the last quarter of 2016 was largely led by the increase in tradable
goods prices. This increase in the prices of tradables is associated with depreciation of the rial and rising
world prices (Figure 5). Non-tradable goods' price inflation however has steadily decreased since the
beginning of 2015. Interestingly, there has been no increase in non-tradables' inflation since the
beginning of 2016 through the high oil-backed growth that the economy experienced in this year.
Producer price inflation remained around
the same rate as the previous year. The
producer price index (PPI) slightly edged up
to around 5 percent in 2016, up from 4.9
percent a year earlier. However, the increase
in prices across sectors has been varied more
recently.
Figure 5: Exchange rate depreciation and CPI inflation
(y-o-y)
Inflation accelerated
111 the
manufacturing sector from a slight negative
rate in 2015 to around 3.6 percent increase in
2016. The Competition Council has allowed
mncrcases
mn pnccs of domestically
tiinflation0en.a tiiettion Tr
manufactured cars after a freeze was placed
by the council for the second half of 2016,
which is also likely to be reflected in higher
(Plitt ion-otr.he tepee0a0ion
Source: CBI
8
- 73 -

manufacturing PPI in the coming months. However, agriculture and services sectors' PPI, accounting
for the other half of the weights of PPI calculation, slightly moderated to 2.4 and 8.7 percent from 5.7
and 13.8 percent in 2015 respectively.
Low inflation has exposed deep and longstanding fragilities in the country's isolated, multi-tier
banking system. One of the major issues that the banking sector has been grappling with is the
persistence of high deposit and lending rates, which arc associated with pervasive adverse selection and
moral hazard arising from weak credit market infrastructure and strong political influence on bank
lending. During the high-inflation period before 2015, when inflation reached 34 percent, deposit rates
as high as 20 to 30 percent were considered tolerable. However, while the authorities succeeded in
curbing inflation in the past two years, the interest rates did not adjust accordingly. As a result, the banks
have been paying a significant positive real rate of return to their depositors, rates that during the high
inflation period were predominantly negative in real terms. This caused capital to divert from other
sectors of the economy and flow into the banks depressing activity in the productive sectors such as
manufacturing. The weakness in the real sector production caused a negative knock on effect which in
tum left the banks with a growing amount of illiquid assets, low capital adequacy and high non­
performing loans on their balance sheets (many of which arc loans to SOEs). This reinforced banks and
other financial institutions to compete for liquidity by keeping interest rates at high levels that were not
aligned with the fundamentals of the real economy. In the past few months, managing this turmoil has
been the top priority of the CBI. Though the Bank does not use conventional policy rates it has intervened
through a number of channels. The unregulated shadow banking sector was audited and reconsolidated
in order to operate under the direct supervision of the CBI. In August 2017, the Central Bank issued
instructions to all banks to reduce deposit rates to a maximum of 15 percent for one-year deposits and
I0 percent for shorter-term accounts. The authorities also embarked on recapitalization of banks and the
government has committed to paying back its arrears to the banking system along with other measures
to tackle the imbalances in the sector.
The Central Bank has pushed through the implementation of a range of other reforms to overhaul
the banking sector operations and support the economy. The authorities have begun to address the
structural challenges through the preparation ofa detailed 'road map' to strengthen the resilience of the
banking sector and in parallel, reform its legal and regulatory framework. Important steps were taken to
recapitalize banks with high levels of illiquid assets. The government issued a decision to allow the
clearing of banks debts to CBI by offsetting it against their existing claims from the government. The
government also increased its capital in public banks and waived interest payments 011 loans ofup to I
billion rial for a maximum of 450 billion rial of loans. These measures led to a reduction of 131.2 trillion
rial of government debt to banks and 242.5 trillion rial capital increase for public banks. The monetary
authorities have also required banks to sell excess assets based on a given timeline, which if not met will
subject banks to new penalties and taxes. To more effectively monitor and mitigate potential emerging
threats to financial stability and resolve troubled banks, the authorities have drafted new bills on banking
and the central bank. The authorities have also continued streamlining of lntcmational Financial
Reporting System (IFRS) guidelines among all financial institutions and officially came to an agreement
with the Ministry of Finance's Audit Organization on the role of each entity regarding future supervision
and introduction of financial reporting principles.'The standardization of financial reports contributed
to improvements in transparency and was a factor in the decision of the Financial Action Task Force
(FATF) to extend suspension of Iran from its blacklist of countries. FATF has announced that it will
continue to monitor Iran's fulfilment of its action plan to improve the regulatory framework for anti
money laundering and combatting the financing of terrorism. Other measures undertaken by the CBI
15
https//financialtribune com/articles/economy-business-and-markets/731Io/iran-dispute-oyer-ifrs-compliance­
resolved
9
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include finalizing the transfer of all government accounts to the CBI, expanding banking services for
non-resident entities and a directive on all foreign currency purchases by people travelling abroad at the
market rate offered by commercial banks.
Reestablishing correspondent banking relations (CBR) with major international banks have
remained as a major challenge. For global banks, the political uncertainties surrounding conducting
financial transactions with Iran and the precedence of large fines that were imposed on banks and
businesses during the sanctions period continues to overshadow the prospects of reconnecting with
Iranian banks. However, the CBI and the ministry of finance have succeeded in negotiating a number of
direct credit lines with banks in a number of countries including Korea, Austria and Denmark. These
could pave the way for further expansion of financial relations.
Unification of the official and market exchange rates has been further postponed. The wedge between
the interbank official rate and the parallel market rate has remained stable between 15 to 17 percent of
the official rate between April and November 2017. The authorities have publicly committed to
implementing the unification of the two rates, although this is further delayed from the revised target
date (end of 2017 fiscal year). The real effective exchange rate depreciated by 4.2 percent during Oct­
Dec 2017, bringing the first three quarters' average rate to 0.6 percent below the rate of the previous
year.
The Tehran Stock Exchange (TSE) index has risen in 2016, before declining through the first five
months of 2017. The overall index increased by around I4 percent in 2016, albeit on the back of a
slightly narrower volume of trade with respect to 2015. The improvement was particularly sharp in the
immediate aftennath of JCPOA as investor expectations were adjusted to the prospects of a more bullish
market. The rise in the top 30 index however, was not as pronounced. TSE index (TED PIX) declined by
5 percent from January to May 2017 and recorded thin trading volumes as uncertainties before the
elections mounted. In the aftermath of the May elections the stock market received a boost and started
on an upward trend which was further strengthened due to the increase in world energy prices, which
particularly influenced the shares of petrochemical (accounting for around 30 percent of the TEDPIX).
Furthermore, the reduction of banking sector deposit rates and reduction of government bond yields also
contributed to the surge of the index above the 95,000 band by December 2017 (almost I9 percent higher
than what the index registered in May)
E. External Position
Iran's external position improved in 2016 following the slump in the current account surplus in 2015,
The surplus rebounded from 2.3 percent of GDP in 2015 to 3.9 percent of GDP in 2016, with higher oil
production, due to the lifting of sanctions and improved oil prices (Figure 6). According to the
government sources, oil exports increased to 2.1 mbpd by the end of 2016, compared to 1.5 mbpd in the
same quarter of the previous year. Buoyed by the oil recovery, total exports grew by more than 26
percent after a 25 percent contraction in the previous year. Net exports surged to 3.6 percent as a share
of GDP, up from 2 percent of GDP in 2015, as the increase in exports more than offset the increase in
imports. On the financing side, while FDI increased from US$2 billion in 2015 to US$3.4 billion in
2016, it remains significantly short of the high of US$4. 7 billion observed in 2012 and the government's
targets under the five-year development plan.
IO
- 75 -

Figure 6: Current account balance, exports and
imports
Figure 7: Iran's top I0 import partners
million USS
180.0
20000
15000
160.0
140.0
120.0
�
1oo
is.i...
10000
~as
5000
•
40.0
20.0
0
00
40
Current account bale%G0 (8-) [ports ingorts
Source: World Bank
Source: IMF DOTS.
The gradual re-shifting of Iran's exports towards advanced economies continued in 2016. Around 44
percent of the country's exports in 2016 were to the European Union and other advanced countries
Iran's oil exports volume to Europe is reported to have increased by a factor of 7 between January to
April 2017 year over year. In this period, France is reported to have become the second biggest importer
of Iranian oil, accounting for 24 percent of oil exports.
The top I0 import partners of Iran remained the same as previous years. The UAE and China continue
to remain at the top of the list however in 2016 while imports increased from UAE by 8.9 percent, total
value of imports from China contracted by I percent (Figure 7). Turkey's exports to Iran increased by a
staggering 37 percent in 2016, equivalent to more than 55 percent of China's exports to Iran in the same
year. However, overall trade with Turkey remained almost the same as Iran's imports increased almost
as much as its exports reduced in 2016.
Figure 8: Real Effective Exchange Rate index (CPI
Recent data indicate a considerable slowdown
in non-oil exports in the beginning of 2017.
based, quarterly, 2010=100) and Non-oil exports (as
Following the appreciation
111 the real
% of non-oil GDP
REER Non-oil exports (% of non-oil GDP)
140
10.0%
9.0%
120
8.0%
100
7.0%
6.0%
80
5.0%
exchange rate since 2014, non-oil exports as a
share of non-oil GDP came down from 9.1
percent in 2015 to 7.9 percent in 2016 (Figure
8). More recently, Iran s non-oil trade balance
slipped back into a deficit in the first 5 months
of the 2017 fiscal year compared to the surplus
in the first 5 months of 2016. In the same
period, petrochemical exports were reported at
around USS$4.6 billion down from the US$9.6
4.0%
60
2011
2012
2013
2014
2015
2016
Sources: IMF and CBI
billion in 2015. The authorities plan to further
expand petrochemical output to 120 million
tons by 2022 from the 2016 output of around
50.6 million tons. The decline
in non­
petrochemical exports such as copper and steel was partly due to export restrictions by the government
to control domestic prices while petrochemical exports downward trend can be also attributed to
restrictions imposed by China on Iranian firms because of the implementation of new banking regulation
in China.
11
- 76 -

Table 2: Iran's Non-oil Export Destinations
2016
2017 Apr-Sep
There has been some
shift in Iran's non-oil
export destinations in
Value
Share(%)
Value
Share (%)
(million
(million
2016 Rank
US$)
US$)
2016. Table 2 shows the
country's
top non-oil
I
4,313
21
China
export
8,377
destinations
19.07
According
2
UAE
to
I ran
7,436
16.93
2,953
14.4
Iraq
3
6,111
13.91
3,180
15.5
918
4.5
4
Turkey
3,244
7.39
2,064
10
5
Korea
2,877
6.55
6
India
2,788
6.35
6.5
5.8
1,337
1,199
7
Afghanistan
2,457
5.59
43,930
20,544
World
Customs Administration
(RICA), the value of non­
oil trade with Iraq in 2016
stood at around US$6. I I
billion which accounted
for almost 14 percent of
total non-oil exports,
placing Iraq as the third biggest export destination of Iranian non-oil exports in 2016. Non-oil exports
to Iraq consists ofa range of agricultural produce, ceramics, automobiles, machinery and food products.
Data for the first half of 2017 also suggest a slight uptick in exports to Iraq-to US$3. I 8 billion or
around 5 percent higher compared to the same period in 2016. This puts Iraq below China as the second
biggest importer of Iranian goods. However, more recently Iraq has increased tariffs and introduced
import bans for certain goods such as cement. Previously one of the major Iranian exports to Iraq had
been cement which accounted for more than 60 percent" of total exports of the product. Towards the
end of 2015 Iraq had banned imports of cement to help protect the domestic production. More recently,
in November 20 17, Iraq more than doubled import tariffs of Iranian dairy products. It is also worth
noting that official export and import figures between Iran and its neighbors, especially Iraq, are likely
to underestimate the real size of trade between the two countries due to the significant amount of cross­
bordcr unoffieial trade and smuggling (especially with the KRG region). Trade with Azerbaijan in 2016
stood at around 500 million after recording a significant growth of 70 percent. Iran's goods exports to
the country was around US$359 million, accounting for less than 4 percent of Azerbaijan s imports.'
The two countries have recently moved towards strengthening political and economic tics that could
indicate a possibility of expanding cross border investments and trade in future years.
" jttps//financialtribune com/articles/economy-business-and-markets/60773/iran-cement-exports-II5m-tons­
in-IL-months
'https://w al-monitor com/pulse/originals/2017/IL/iran-azerbaijan-ties-russia-aliyev-rouhani-expansion html
12
- 77 -

II. OUTLOOK AND RISKS
Revived medium-term growth prospects are dependent on at least modest reintegration with global
trade and finance. While the 2016 economic performance was stronger than initially envisaged on the
back of an impressive bounce back in the oil sector, medium-term growth outlook continues to be
plagued by uncertainties regarding the reestablishment of banking, investment and trade linkages
(beyond the recovery in oil exports). As oil production reaches close to full capacity levels, growth is
expected to moderate to 3.5 percent in 2017 with the help of a recovery in gross fixed capital investment
that will drive both oil and non-oil sectors. Iranian economy is expected to grow by an average of 4
percent in 2018-2019, slightly lower than projected in the Spring 2017 issue of the Iran Economic
Monitor (EM). This moderate growth outlook however still hinges on the assumption that some of the
agreements between Iran and major foreign companies in the oil and gas and other key sectors, including
manufacturing, will materialize, helped by the availability of trade financing through foreign banks.
The banking sector is a major overhang on macroeconomic stability and a source of drag on the
moderate growth outlook described above. The Iranian banking sector remains fragile, after a long
period of being substantially cut off from foreign capital, credit lines, correspondent banking facilities
and know-how. The Iranian banks operate with numerous constraints on deposit and lending terms,
impacting resilience and performance (capitalization levels, return on assets I equity, liquidity and the
rise of non-performing loans, etc.). As a consequence, with limited capital or liquidity buffers, many
banks are vulnerable to external shocks and have sharply increased their borrowing from the central
bank in 2016. Tackling the deep rooted structural problems of the banking sector remains as the single
most important initiative towards ensuring macroeconomic stability in order to achieve sustainable high
growth rates.
Increased inflationary pressures will make maintaining single digit inflation challenging. Following
a substantial decline in CPI inflation in the last two years, inflationary pressures started to build up
particularly through food prices. Under the baseline scenario, inflation is projected to reach IH.5 percent
in 2017 and case to marginally below I I percent in 2018-2019. As a result, continued tight fiscal and
monetary policies will be crucial to keep inflation under control. Finalizing the long-delayed unification
of the official and parallel market exchange rates will also be a positive step towards building credibility
and promoting macroeconomic stability.
Demographic changes imply increased urgency for deep fiscal reforms focused on transfers. While
fiscal balances in the last few years suffered from low oil revenues, in the medium-term spending
pressures will dominate, given the expected rise in interest payments from securitization of government
arrears and the burden arising from the challenges in the pension system. The pension system in Iran is
experiencing a considerable decline in the support ratio ( contributors per beneficiary) and the parameters
of the schemes are not aligned with the overall sustainability of the system. The system also suffers from
low returns to investment and growing government arrears. As a result, government transfers to the civil
service and military pension schemes, which increased from 2.8 percent of the total budget in 2005 to
14 percent in 2014, are expected to further widen to 28 percent in the next 7 years. In 201 4, total deficit
of the system reached around 4 percent of GDP.Thus. reforming the pension system to ensure long term
sustainability is a major priority for the policymakers.
13
- 78 -

ANNEX
IRAN: SELECTED ECONOMIC INDICATORS (2014-2019
9014
9015
9016
9017 o1
019
Act
Est
Act
Proj
Proj
Proj
Real sector
(annual percentage change, unless otherwise specified
Real GDP at factor cot
8.
-16
12.5
3.5
8.9
fl
Total oil production (million barrel/day)
8
8.2
8.
0
#.
4.
Crude oil, average price (US$)
962
50.$
+2.$
58.0
56.0
59.0
Money and prices
(annual peroentage change, unless otherwise specified
CPI Haflation (p.a)
15.6
19
9.0
11.5
10.9
10.6
Investment & saving
(percent of GDP, unless otherwise specified)
Gross Capital Formation
26 l
22
20.8
20.6
22
28.T
Gros National Saving
292
25.1
242
24
26
274
Government finance
(peroent of GD, unless otherwise specified)
Total revenue
140
15.
16.T
76
7.8
7.7
Ta Revenue
62
69
TT
7$
8.0
8.0
Direct Tare
8
8.$
8.$
8$
89
8.9
Indirect Taxes
8.0
82
4.0
89
40
l
Total expenditure
151
174
18.9
20.0
202
19
Current
12.5
15.0
16.
16.
15.5
15.2
Net lending/borrowing (overall balanoe)
-I l
-17
-2
-2
-28
al
Eternal see tor
(percent of GD, unless otherwise specified)
Current Account
8
28
89
l
4.0
8.$
Net Export
26
2.0
8.6
87
86
84
Export of Goods and Servioe
229
198
24
28 T
258
268
Export ad Good
20.5
16.7
20.0
20.9
222
288
Export of Servioe
#
26
24
2.$
,.,
8.0
lmport of Goods and Services
20.8
17.8
1s.9
20.1
21
28.0
Import of Good
16s
18.6
151
72
16.6
197
lmports of Services
.0
87
8.$
29
82
8.
Total International Reserves (Billion US$)
1262
12s.4
147g
1834
166.
17$ 1
as Months of Import (number of months)
IT1
28.0
18.8
20.7
24
44
Total Gror External Debt Stock (USs bln)
5.1
5
6.5
5
8.8
8.$
Total Gros External Debt Stock(% of GDP')
12
1.9
2.0
,.,
2.0
21
Memorandum Item
x@oral GDP_Uh I"
11,517,46%
11,414,167
18,151,259
14,764,849
16,660,758
16,$69,961
Sour
oe Government Data and Wold Bank Staff Calculation
Fiscal year ends March 2o. For example, 015 corresponds to the fiscal year of 2015/92016
RR Iranian Hals
14
- 79 -

SPECIAL FOCUS: RECENT TRENDS IN EMPLOYMENT AND LABOR
MARKET OUTCOME"
I.
Introduction: Linkages between economic growth and employment
The relationship between economic growth and employment in Iran has displayed a puzzling trend
over the years. Between 2005 and 2012, real non-oil GDP grew steadily, while net employment
remained stagnant (Figure 9). The employment-to-growth elasticity was low at just 0.I0, especially
when compared to an average of0.56 percent for countries of the Middle East and North Africa (MENA)
region (Figure 10). In other words, the relatively high growth in the non-oil sectors of the Iranian
economy was not job intensive. Figure 9 suggests a weak and in some cases, even reverse relationship
between economic growth and employment.
Figure 9: Real Non-Oil GDP and Employment in Iran
(4-Quarter Moving Averages)
8.8
10.08
Subsidy Reform
•
% --
Intensification of International Sanctions
ii:
Log Real Non-Oil GDP in Trillions of Rials
8.7
%
. Log Employment 10+
10.05 e
• +t
c
2 8.6
£
E
£
.. 0
10.02
%
$
8.5
0
f
9.99
£
5
E
c
•
0
8.4
z
9.96 £
%
• tr
9
a
E
% 8.3
w
9.93
%
ht
9
bd
9
8.2
9.90
8.1
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Source: Calculated based on the data published by the Statistical Center of Iran.
18
This Special Focus was prepared by Jumana Alaref (Social Protection Economist. GSP05) and Johannes Kocttl
(Senior Economist, GSPo5), Its analytical work and findings are derived from a comprehensive report prepared
and authored by Hadi Salehi-Esfahani (University of Illinois at Urbana-Champaign)
15
- 80 -

Figure 10: Employment-growth elasticities, 2003-13
Chile
0.7
Saudi Arabia
0.65
Turkey
0.44
Malaysia
0.39
Indonesia
0.28
Vietnam
0.25
Russian Federation
0.14
China
-
0.04
Iran (non-oil)
0.1
Iran (oil and non oil)
0.19
MENA
0.56
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Note: Employment-growth arc elasticities are calculated as the percentage change in employment between the two points of time to the
percentage change of GDP. For lran, it has been calculated for 2005-2013 period while for other countries it is for 2003-2013 period
Source: Calculated based on the data published by the Statistical Center of Iran
Two factors took place in the early 20lbs that have had consequences on growth and the Iranian
economy. The first is the subsidy reform, which significantly reduced energy and food subsidies and
introduced a large universal cash transfer at the end of 2010. Figure 9 demonstrates that GDP rose
robustly through 2011. The second factor was the intensification of international sanctions in mid-2012,
which together with the rise of inflation over the following months resulted in a strong decline in
economic activity and worsened labor market outcomes. FDI inflows to Iran were adversely affected,
which led to a decrease in the number of jobs created by greenfield FDI (Dcvarajan & Mottaghi, 20 15)
While recent quarters in 2017 seem to indicate that GDP and employment trends are beginning to
converge, job creation remains heavily constrained. In 2016, while the adult labor force grew by LI
million, the economy managed to generate about 0.6 million net additional jobs. As a result, 470,000
people joined the ranks of the unemployed, and the rate of unemployment rose tangibly from I0.5
percent in 201403 t0 12.3 percent in 201603 and even edged up to 12.6 percent in the first quarter of
2017).
As an additional challenge, the labor force participation (LFP) of adults remains quite low in Iran,
hovering in the 40 to 43 percent range in the past decade (Figure 11). This is considerably low by
international standards (Figure 12). If the LFP rises to 50 percent, at least 4 million new jobs (about 18
percent of current total employment) have to be created to keep unemployment from rising, not taking
into account further population increases. The pressure further increases as employment stagnation
during the 2005-2014 period motivated young people to prolong their education and postpone their labor
market entry as a mean of avoiding unemployment and better positioning themselves for future job
opportunities. Between 2006 and 2015, the total number of students enrolled in higher education in Iran
went up from 2.8 million to 4.8 million. The highest rate of enrollment increase was among master's
16
- 81 -

level students (5.7 times for men and 6.7 times for women). The challenge of placing young educated
entrants into the labor market will persist over the next several years.
Figure H: Labor Foree Participation, Employment, and Unemployment Rates
(4-Quarter Moving Averages)
so
I
I
I
45
I
I
I
40
I
35
I
I
'
I
I
I
I
I
30
Total LFPRAte 104
I
Total Employment Rate 104
Total Unemployment Rate 10+
I
I
I
I
Subsidy Reform
I
intensification of International Sanctions
I
I
15
- -
10
I
I
I
I
5
I
I
I
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Source: Calculated based on the data published by the Statistical Center of Iran.
Figure 12: Labor force participation rates, Iran and comparator countries, 2013
Vietnam
77.5
China
73.7
Indonesia
67.6
Russian Federation
63.3
Chile
60.7
Malaysia
60.2
Saudi Arabia
50.2
Turkey
49.4
Iran, Islamic Republic of
45.7
0
20
40
60
80
100
Source: ILO KILM IL.O estimates
A careful look at the age structure of the population in Iran indicates that the challenge of matching
the supply of labor with sufficient job creation may lessen in the upcoming decades as the country
17
- 82 -

passes its 'demographic dividend'. Starting early 2000s, Iran has witnessed strong growth in its working
age population, a result of the baby boomcrs of the 1970s and 1980s, which was followed by a strong
decline in the age-dependency ratio and a drop in fertility. Between 2005 and 2016, the size of the 25-
39 age cohort witnessed a significant increase, while the size of the 10-25 age cohort witnessed a sharp
drop. It is the former cohort that has entered working age exactly when the economy failed to generate
employment opportunities for them. Once the current cohort of those in that age group settles with jobs,
the task of meeting the demand for jobs will become easier. This indicates a significant risk that Iran
may face in a few decades, when the baby boomers begin to retire and will need to be supported by a
much smaller working-age population.
This Special Focus consolidates available evidence on trends of recent labor market outcomes in Iran.
Section 2 elaborates on the present labor market participation and unemployment challenges, with
emphasis on groups who appear to be most adversely affected, namely women as well as the young and
educated workforce. Subsection 2.1 presents a picture of employment trends over the last decade by
gender, education, occupation, and sector. Subsection 2.2 provides a discussion on the sectoral shifts in
employment over the last decade. Section 3 provides some possible hypotheses for the persistent job
creation challenges. Section 4 concludes.
The methodology for the analysis relied on time-series aggregate labor force and firm-level
(manufacturing) data obtained from the Statistical Center of ran. Further analysis would benefit from
more detailed data on wages and informality.
2. The Challenge of Labor Market Participation and Unemployment
It is essential that Iran reaps the benefits of its demographic window of opportunity before facing an
aging population. Currently, ran is underutilizing its second most abundant resource-labor-and
women and youth in particular. As previously mentioned, overall labor market participation (LFP) rates
arc low in Iran and stood at 39.4 percent in 2016. A further disaggregation reveals stark differences by
gender and age (Table 3). Almost 64 percent of men aged I 0+ participated in the labor market in 2016,
while the participation rate for women was only 15 percent, lower than the already low MENA average
at 20 percent. Between 2005 and 2013, the LFP rates for both genders, particularly among youth,
witnessed a dramatic decline. The LFP rates for men are the highest for those aged 30-44, which
remained relatively stable over the years, given the growth of this age cohort. On the other hand, younger
and older men participate less and their rates have fallen over the years. Women aged 25-29 participate
the most in the labor market when compared to other age groups. However, the pre-2013 drop in
women's LFP rates affected all age groups and contrary to the case of men, it was much more
pronounced in the middle of the age distribution. The drop for both genders seems to have halted in the
last few years, although it did not recover to its 2005 levels.
I8
- 83 -

Table 3: Labor Market Trend
for Women and Men I0 Years and older in Iran
- 84 -
s
omen
Men
ear
2005
I
2009
I
2010
I
2012
I
2014
I
2016
2005
I
2009
I
2010
I
2012
I
2014
I
2016
Adult Population Io+ (million)
28 145
30.410
30.935
31.388
32.064
32.836
28.618
30.936
31456
31324
31.953
32.603
Labor Foree 10+ (millions)
4.781
4408
4.349
4400
3.859
4.893
18.513
19432
19526
19 705
19.960
20.899
LFP Rate 10+ (%)
17.0
145
4.I
13.8
12 0
14.9
64.7
62.8
621
61.6
62.5
64l
Employed I0+ (millions)
3.962
3.667
3457
3.526
3.099
3.881
16.657
17334
17.200
17.635
18.205
18.707
Unemployed 10+ (millions)
0819
0.742
0.892
0.874
0.760
1 012
1.856
2.098
2326
2 070
1 755
2192
Unemployment Rate 10+ (%)
171
16.8
20.5
199
197
20.7
I0.0
10.8
L9
10.5
8.8
10.5
Unemployed, 15-24 (millions)
0452
0.318
0.379
0.320
0.228
0.265
0912
0853
0.922
0.750
0.534
0.605
Unemployment Rate, 15-24(%)
326
41.3
324
41.5
43.8
44.2
20.4
22.7
25.5
234
213
234
Unemployed, 15-29 (millions)
0.658
0.567
0 714
0.640
0.526
0.645
1269
1.356
1483
1333
L.038
1
182
Unemployment Rate, 15-29(%
299
31.0
39.7
38.
40.1
42.3
178
19.7
218
20.9
17 8
214
Source. Calculated based on the data published by the Statistical Center of Iran
19

In addition to high inactivity rates among youth, the share of those not in employment, education or
training (NEET) is high, especially among young women. More than a third (34 percent) of youth (aged
15-24) were not in employment, education or training in 2013, which is the highest share among comparator
countries (Figure 13). The NEET share is higher among young women (48 percent) when compared to
young men (22 percent) in Iran.
Figure 13: NEET Rates (%), 2013
60
50
40
30
20
10
0
u h l ll ill
Malaysia Vietnam Russia
Chile
Saudi
Indonesia Turkey
Iran
Arabia
■ Male ■ Female ■ Total
Source: ILOKILM 1LO estimates
The profile of I FP rates for men and women also differs in rural and urban settings. LFP rates for men
aged 30-44 have remained stable over the years in both urban and rural settings. For women, however, the
decline in participation between 2005 and 2014 is quite large in rural areas, suggesting that a large chunk
of the decline in female LFP rate was due to the departure of rural women from the labor market. For
example, LFP rates for women aged 25-29 in rural areas declined from 29 percent in 2005 to 16 percent in
2014.
Patterns of unemployment follow patterns similar to those of LFP. The striking differences again emerge
with regards to youth and women. National unemployment rate reached 12.4 percent in 2016. The largest
cohort of employed persons arc individuals in their 30s Employment of individuals in their 20s has
continued to decline over the years and youth unemployment rates currently remain much higher than the
national average for both men and women (Figure 14). The unemployment rate for women aged 15-24
years old reached over 4 percent in 201 6 and 26 percent for male youth.
20
- 85 -

Figure 14: Labor Foree Participation and Unemployment Rates by Gender
a) women
Female [p Rate 10+
I
70
« Female Unemployment Rate 10+
I
I
I
I
«Female Youth Unemployment Rate, 15-24
Female Youth LP Rate
60
I
I
I
I
Subsidy Reform
intensification of International Sanctions
50
I
I
I
I
-
'
- r
-
I
30
I
I
I
I
20
I
'
J_
I
10
0
.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
b) men
I
I
I
70
I
I
I
I
-
60
I
I
I
-
so
I
I
I
I
I
I
I
Male LP Rate 10+
-
Male Unemployment Rate 10+
«Male Youth Unemployment Rate, 15-24
« Male Youth LP Rate, 15-24
30
..... a
a
-
20
I
I
I
I
I
I
I
10
I
I
.
0
.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Source: Calculated based on the data published by the Statistical Center of Iran
21
- 86 -

2.1 Employment Trends!
Female employment seems to be particularly affected by the broader context of a constrained job creation
environment. Large fluctuations in the LFP in the short run for both men and women and the strong
correlation with employment indicate that the main drivers of employment arc probably from the demand
side. In other words, it seems that employment is driving LFP and not the other way around in the sense
that working-age individuals, especially women, tend to enter and exit the labor force as job availability
expands or contracts.
The slow recovery of the economy after 2014 has been associated with very rapid return of women to the
labor market and improvements in their employment outcomes. For men, the job market recovery has
helped speed up employment growth somewhat, but not nearly as much as the case for women. In 2015 and
2016, female labor force grew by 730,000 and male labor force by 960,000, but each group gained 620,000
jobs. This is quite a remarkable development given that until recently in the economy as a whole, women
were holding less than 19 percent of all the jobs.
A notable development that has had effects on the Iranian labor market, particularly for women, is the
tremendous rise in the supply of educated labor (Salehi-Isfahani, 2009; Haddad and Habibi, 2017).
However, most of them joined the ranks of the unemployed. Between 2008 and 2015, the share of women
with tertiary education among economically active women has risen tremendously, meaning that they
comprise the bulk of active women. However, educated women mostly joined the ranks of the unemployed,
suggesting that the pace of high skilled job creation is not enough to absorb the increased number of women
with college and graduate degrees. Between 2008 and 2015, the share of women with higher education
among the ranks of the unemployed has increased from 5l percent to about 62 percent for those with
bachelor's degrees and from I percent to 12 percent for those with graduate degrees. This finding is
consistent with other MENA countries. In Egypt, LFP rates among tertiary educated women reached 62
percent in 2015, with very high unemployment rates among this group at 32 percent.
For men, education has had somewhat similar, though much weaker, effects on the LFP and
employment compared to the case of women. The share of men with higher education among economically
active men has increased in the past decade, although it remains much smaller than that of women. Between
2008 and 2015, the share of men with higher education among the ranks of the unemployed has increased
from around 14 percent to 25 percent for those with bachelor degrees and from I percent to about 3 percent
for those with graduate degrees.
Increased education among Iranian women amidst the stagnation in the job market prior to 2014 seems
to also suggest that educated women ended up substituting the less educated ones among the employed
The substitution of many unskilled jobs by skilled ones is reflected in occupational distribution of
employment between 2005 and 2015 (Figure 15). Unskilled positions had diminished in the 2000s for
women from 9 percent in 2005 to 7 percent in 2015, and they appear to have been replaced by professional
positions that have become the biggest occupational category of female employment. Managerial, technical,
and sales and service positions have also grown robustly for women. For men, the most visible occupational
shift is a move from specialized agricultural jobs to unskilled and, to a lesser extent, to machine operator
(including driver) and professional positions.
I The discussion on informality is missing from this section due to the lack of data availability.
22
- 87 -

Figure 15: Occupational Distribution of Employed Women
30
25
20
15
E
• 8 10
•
1:7
a
5
0
ta
-
a
e
e
e
e
e
•
c
•
•
%
d
•
%
6
4
4
�
q
•
6
4
%
>
z
E
%
%
0
c
3
d
a
3
3
u
0
3
q
E
0
0
00
e
•
£
d
"
>-
w
U c
£
u
c
�
• t
2
z
c
$
E
•
.,
€
5
•
c
E
•
�
c
e
.:,
8
q
2
2
o
o
2
a
•
2
c
c
6
• 2
00
·a
u
c
d
u
7
•
�
>-
Occupational Category
2005 2008 2012 2015
Source: The Statistical Center of Iran
Consistent with the decline in unskilled jobs, the number of unpaid family workers has witnessed a sharp
drop, from 2.62 million in 2005 to 1.05 million in 2014. They appear to have been replaced by better
quality jobs in the formal sectors. For women, the decline in unpaid family workers was from I44 million
to 605 thousand, and for men, from LI8 million to 450 thousand. The category of unpaid family worker
appears to have been replaced by employment in the private sector for both women and men, which is a
key development as those jobs are likely to be of higher quality. The share of private sector employment
increased from I9 percent in 2005 to 31 percent in 2015 for women, and from 34 percent in 2005 to 41
percent in 2015 for men. The share of public sector jobs in total female employment has also somewhat
risen from 23 percent in 2005 to 26 percent in 2015. For men, on the other hand, their employment in the
public sector has declined from 18 percent in 2005 to 15 percent in 2015. Men's employment as independent
workers has increased while it decreased for the employer category. The decline in employer positions and
the shift towards employee positions is in line with evidence presented below regarding the decline and
possible exit of small firms and micro enterprises from the market.
Looking at the highly educated only, the public sector is the major source of employment, suggesting the
presence of a high wage premium, similar to what is observed in other MENA countries. While the share
of employees with university and graduate degrees in the private sector employment has been about 7
percent in 2005 and rose to about 12 percent 2014, among public sector employees that share was about 4 7
percent in 2005 and rose to about 65 percent in 2014. The common belief is that there is a wage premium
23
- 88 -

for those with higher education in the public sector."Without micro-data on wages, this Special Focus
cannot assert whether the persistence of education wage premium is explained by labor regulations and
public sector practices that reward diplomas or by higher productivity of educated workers and better
technical/soft skills relative to their less educated counterparts in similar positions.
Although female employment has somewhat recovered post-2013, females continue to face a lower
probability of successfully completing their transition into the labor market, when compared to their
male peers. Female unemployment has historically been more persistent than male unemployment (Figure
14). While male unemployment spiked in 20 I 0/11, it has rctumcd to its 2005 levels in 20 I 6, at I0.5 percent.
Female unemployment remained high, at 20.7 percent in 2016. and further increased for those aged 15-24.
The challenge of unemployment will persist over the next several years, particularly for the educated
entrants, as the stagnation of the job market has motivated young people to acquire more schooling as
means of avoiding unemployment and to better positioning themselves for future job opportunities. The
demand for master's level and PhD education has continued to rise in recent years, as indicated by the trend
in new enrollments (up from 220,000 in 2013/2014 academic year to 291,000 in 2014/2015 academic year)
(Figure 16). Graduation rates at the master's level and above will thus continue to rise for some time,
.
2l
placing more pressure on the labor market.
Figure 16: Enrollment in Higher Education by Gender, 2006-2015 (Thousands)
350
300
291
250
220
1es194
200
157
150
134
132
100
so
0
sl .ail l
Women
Men
Total
2006-2007 i 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Source: The Statistical Center of Iran
20
Asadbeigi. Naderi, and Entezari (2013) examine the perceptions of Iranian university students and show that they
expect substantial returns to education. Haddad and Habibi (2017) find that the education premium has persisted
in both public and private sectors, though it has been declining gradually in the private sector.
2
The fact that enrollment in higher education is increasing, while the share of NEET, as reported earlier, is also high
warrants further investigation to reconcile both results.
24
- 89 -

2.2 Sectoral Employment Trends
Worsening female labor market outcomes in the 2000s were associated with the decline in
agricultural employment (Table 4), which have historically constituted a large share of female
employment. Consistent with earlier evidence on the drop of LFP rates among women in rural areas and
the decline in the number of unpaid family workers, agricultural employment among women witnessed a
sharp decline during 2005-2014. In 2005, a third of female employment in the economy was in agricultural
activities. That share declined to less than 22 percent in 2014.
Table 4: Share of Agriculture, Industry, and Services Sectors in Total Employment in Iran
Women
Men
Year
200s
]2009 ]2010 ]
2012
]
2014
]
2016 2005
]
2009
] 2010]
2012
]
2014
]
2016
Employed in Agriculture 10+
(millions)
1.330
1.1 I 8
0.966 0.890 0.677 0.853
3 770 3.262 3.003
3 112
l3. I 35
J 3.208
Share in Employment I0+
33.6
30.5
28.0
25.2
21.8
22.0
22.6
(%)y
I8.8
17.5
17.6
17.2
17.1
Employed in Industry 10+
1.123
0.935 0.844 0.894 0.754
0.977 5134
5.740 5.808 6.212
Fl 6.224
(millions)
Share in Employment 10+
28.3
25.5
244
254
24.3
25.2
(%)y
Employed in Services 10+
30.8
33.1
33.8
35.2
354
33.3
1.507
1.613
1.646
1.742
1.668 2.051 7.750 8.330 8.388 8.311
Fl 9.272
(millions)
Share in Employment 10+
38.0
44.0
47 6
49 4
53.8
52.8
(%)y
46.5
48 I
48 8
47.1
474
49 6
Source: Calculated based on the data published by the Statistical Center of Iran
Men's share in agricultural employment also dropped, but appears to have been somewhat compensated
by a rising share of employment in the industrial sector. Mens share in agricultural employment dropped
from 22.6 percent to just over 17 percent during the same period. The rise in the male unemployment rate
due to agriculture's contraction seems to have largely gone away by 2014. For women, in contrast, the
unemployment rate did not return to its pre-2005 rate (Figure 14). Some of the decline in agricultural
employment for men appears to have been somewhat compensated by a rising share of industry in their
total employment, from 30.8 percent in 2005 to 35.4 percent in 2014 (Table 4), whereas females witnessed
a decline in their industrial employment, from 28 percent in 2005 to 24 percent in 2014.
Employment growth in the industrial sector between 2005 and 2014 was modest, mostly driven by the
growth in the construction sector. Disaggregating employment growth in the industrial sector between
2005 and 2009 reveals that employment mostly expanded in construction, real estate & professional
services, retail & wholesale trade, and transportation & communications. However, except for construction,
employment growth declined in those sectors between 2009 and 2014.
Employment in the manufacturing sector witnessed a consistent decline from 2005 to 2014. The number
of small manufacturing firms (with I 0-49 workers) between 2006-2013 declined. This is also true about the
number of medium firms (with 50-249 workers) during 2008-2012. On the other hand, the number of large
(250+ workers) firms remained largely unchanged between 2005-2012 (Table 5).Figure I7 shows a
decline in the share of small and medium sized enterprises (SM Es) in total manufacturing employment from
22
The source of this data is the Survey of Manufacturing Firms with I0 or more workers in Iran (SMF)
25
- 90 -

2006 and 2008 onwards respectively. For large firms, the share in total employment rose steadily after
2007. This suggests a possible shift away from small and, to some extent, medium enterprises towards
larger ones. As SM Es arc considered the engine of job creation, the net result of these changes for the total
employment in manufacturing has been a notable decrease between 2006 and 2012.
Table 5: Number of Firms in Different Size Categories
Year
Small Firms
Medium Firms
Large Firms
Less than 50 workers
50-249 workers
250 or more workers
2003
15622
3449
796
2004
15939
3767
850
2005
15777
3707
855
2006
15687
3822
904
2007
14460
3880
939
2008
12303
3843
923
2009
12550
3771
918
2010
I 1868
3678
912
2011
11567
3566
915
2012
11805
3601
851
2013
11082
3774
955
Source: Survey of Manufacturing Firms with 10 or more workers in Iran (SMF)
Figure 17: Shares of Small, Medium, and Large Firms in Total Manufacturing Employment
0.55
"'
0
0.45
0o
-
z u
£
0.35
�
u:
%
e 0.25
0
c
�
0.15
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Firms with less than SO workers
Firms with 50-249 workers
Firms with 250 or more workers
Source: Survey of Manufacturing Firms with 10 or more workers in Iran (SMF)
For both genders, the service sector, particularly in the public administration, became the major source
of employment between 2005 and 2014. In 2014, the service sector comprised 54 percent of total female
employment and 47 percent of total male employment. Employment up until 2014 grew in government
26
- 91 -

jobs, such as education, public administration, and social security. However, these increases hardly
compensated for the decline of employment witnessed during that period in labor-intensive and
employment-generating sectors, such as manufacturing and agriculture.
After 2014, with the slow recovery of the economy, the service sector continued to be the main source of
growth in job opportunities for both men and women (more than a million jobs, or almost 5 percent per
annum). These jobs remained concentrated in non-tradable sectors, such as public administration defense
and social security, education, and health and social work. Less prominent sectors, such as tourism also
witnessed an increase in employment growth. While men have been more successful in obtaining jobs,
women have still captured a sizeable share of positions in the sector, 37 percent of the net increase in
services employment (Table 4), given that the public administration tends to be intensive in female
employment.
The industrial sector hardly grew after 2014, as the net job growth rate of industry as a whole has been
less than 0.5 percent per year. The jobs that seemed to experience a modest recovery were wholesale, retail
trade, and motor vehicle repair. Retail trade in particular, seems to have been boosted by sales and services
associated with technology products (e.g. sales, installation, and repair of electronic equipment).
Interestingly, though, between 2014 and 2016, male employment in industry diminished by about 213,000
jobs. During the same period, female employment in the sector increased by about 223,000 jobs (Table 4)
In other words, women seem to have replaced men in the industrial sector, though not necessarily in the
same types of jobs. For example, as men exited construction activities, women may have taken up positions
in company headquarters and factory labs. This trend bears some similarities to what other countries, such
as the United States, witnessed in 1960s, although it needs to be examined in more depth in Iran.
In contrast to what was witnessed during the 2000s
- 92 -
,
,
the agricultural sector began to recover between
2014 and 2016. The sector grew by about 7 percent annually in terms ofoutput and 3.8 percent in terms of
employment (Table 4). This helped add almost 250,000 jobs to that sector in two years, with 70 percent of
those jobs going to women.
In terms of the growth of employment in the oil sector, available data from the mining sector indicates
that its share of total employment between 2005 and 2012 was very small, amounting to only 0.3 percent
of total employment in 2012. Following sanctions relief and the resumption of oil production and exports,
that share slightly increased to 0.4 percent in 2014. This might suggest that the limited contribution of the
oil sector to employment growth, partly due to its capital intensity but also due to international sanctions
on exports, have likely increased the demand for labor in the non-oil, albeit non-tradablc, sectors.
The main sectors contributing to non-oil GDP growth are the services sector (around 60 percent) and
the non-oil industrial sector (around 30 percent). This is consistent with what is observed earlier with
regards to trends in sectoral employment. Tradable and employment-generating sectors, namely
manufacturing and agriculture, contributed to only around 20 and 12 percent respectively to non-oil GDP
growth from 2001 t0 2016.
3. Hypothesized constraints to employment and job creation
Addressing the challenge of employment requires an understanding of why economic growth in the
2000s
especially in the non-oil sector, was accompanied by limited employment growth. Without
2
In the MENA region, limited employment creation in the formal sectors has led to the generation of low quality
informal work (especially in oil poor countries) as new entrants were coping with subsistence needs and had few
27

empirical evidence, it is not possible to accurately identify the most binding constraints facing job creation
in Iran. However, several hypotheses arc presented on constraints that may potentially be important to
consider. Further investigation and empirical validation arc needed before any conclusions can be made.
From the demand side, one hypothesis is that policies in the 2000s may have harmed the competitiveness
of tradable industries and may have led to stronger employment growth in non-tradable goods such as
service and construction. With regards to the agricultural sector, the reduction in employment may have
been partly due to increased competition from imports. In the few years before the summer of 2012, Iran
was experiencing a boom in foreign exchange revenues and the government was pursuing expansionary
fiscal and monetary policies, which proved inflationary. There were massive surges in oil revenues during
2005-2008 and 2010-201 2, which led to boosted expenditures and an appreciation of the Iranian Rial. The
government then expanded its imports, especially capital goods, and put low caps on interest rates. Part of
the oil revenues may have been used to increase agricultural imports to keep food prices low as a means of
fighting inflation and poverty. The increase in agricultural activity after 2014 could potentially be explained
by increased government support (in the fonn of input provision, technical assistance, and reduced import
competition), which may have raised the returns to agricultural activities.
A possible explanation for the observed trend in the decline in the share of manufacturing SMEs in total
employment is that these expansionary policies in the mid-2000s that temporarily boosted growth could
not be sustained and their reversal might have proved costly for investment and employment. In 2005,
the government implemented a massive low-interest credit expansion, particularly through the "Quick­
Returns Firms Expansion Program" (QRFEP) This program went into effect in 2005 and was meant to
help increase employment by removing credit constraints on small firms through lending mandates on the
banking system. Table 3 shows a non-negligible jump in the number of medium sized finns between 2005
and 2006, just as the QRFEP program went into effect. This could have been prompted by removing some
of the financing constraints on SMEs. Comparing the interest rates during 2006-2012 on loans to
manufacturing and mining firms with the contemporaneous or forward inflation rates indicates that the real
interest rates must have been significantly negative most of the time, averaging less than -6 percent.
However, low interest rates, combined with expansionary fiscal policies that kept the exchange rate
constant, proved highly inflationary and by 2008 the government had to reverse course and induce a
recession in late 2008 and early 2009 to stabilize the economy.
This suggests that while strong stimulation of aggregate demand boosted growth between 2005 and 2007,
inflation, perceived uncertainties and risks posed by government policies, and intensifying international
sanctions may have discouraged firms from investing or committing to employing workers. Smaller firms
possibly reduced their workforce and some may have exited the market after 2006. The number of medium
sized firms was significantly reduced after 2007. Only larger firms, which are mostly directly or indirectly
under the control of the government, were more able to survive and employ more workers.
25
other opportunities. On the other hand, what was observed in Europe and Central Asia Region was that after
economic transition, structural reforms shed a lot of employment in privatized companies but at the same time
worker productivity was rising. Lack of data on both informality and worker productivity in Iran prevents this
paper from further examining this point
24
In Persian, Tarh-e Gostaresh-e Bongahha-ye Kuchak-e Zood-bazdeh. A summary of the program is available in
Persian on the website of Iran's Parliament Research Center, http //re majlis ir/fa/law/show/127481
2$
Please note that this is one possible explanation among many others. Without panel data, we are unable to
investigate this further and clearly rule out the possibility that some of those small firms might have grown into
medium or large firms. Additionally, without productivity data, we are unable to mule out the possibility that the
shift towards larger firms was productivity enhancing as larger firms tend to be more productive.
28
- 93 -

The contraction of the manufacturing and agricultural sectors provides a compelling insight into why
female unemployment witnessed a big surge while their ]FP rates were considerably reduced in the
2000s to below I5 percent In this regard, trends in female labor market outcomes in Iran bear a similarity
to what is witnessed in other MENA countries, such as Egypt and Morocco. Assad & Arntz (2005) argue
that the appreciation of the real exchange rate that occurs in MENA oil-exporting countries, or in countries
receiving remittance income related to oil, reduces the international competitiveness oftradablc industries,
which are the ones that used to hire more women, leading to 'defeminization of labor force'. As those
sectors contracted in Iran throughout the 2000s, employment for females went up in other non-tradable
sectors, particularly in government jobs, such as health and public administration. However, these were
hardly sufficient to compensate for the loss in tradable sectors, especially amid the increasing supply of
educated females in the labor market. As a result, female unemployment as indicated earlier has not
recovered to its pre-2005 levels. There arc likely other supply side hypotheses that may explain female
labor market outcomes, such as social norms and level of agency, as well as high reservation rates possibly
in response to the implementation of a universal cash transfer program at the end of 20 IO. However, such
hypotheses warrant further evidence and validation.
Other factors related to structural issues in the labor market include the significant rise in wages,
particularly at the lower end of the skill spectrum that has accompanied governments' redistributive
policies, as well as labor market regulations and rigidities. A dramatic increase in the wage index for
construction services along with the indices for unskilled and semi-skilled workers in that industry took
place from 2004 onwards. This may have increased labor costs. Other labor market regulations and rigidities
may have also affected hiring, such as severance payments that tend to protect tenured workers. For
instance, currently employers arc required to obtain third party notification and approval before dismissing
a redundant worker. Severance payments for redundancy dismissals arc more than double the cost for
tenured workers of IO years compared to those of 5 years (payment of 43.4 salary weeks compared to 21.7
salary weeks respectively) (Iran Doing Business Report, 2018).
Additional barriers on the demand side include a challenging business climate and noticeable state
presence in manufacturing and financial services. The business environment in Iran remains restrictive
with the country ranking 124 out of the 189 countries in the 2018 Doing Business. Protecting minority
investors, ease of paying taxes, trading across borders and resolving insolvency are the areas in which Iran
is below the MENA average in terms of distance to the frontier. In addition, there remain concerns about
lack of competition and the role of state in the economy. In particular, the Iranian state continues to play a
key role in the economy with large public and quasi-public enterprises dominating to some extent the
manufacturing and commercial sectors. The financial sector is also dominated by public banks (World
Bank, 20 17)
Recent trends suggest that GDP growth and employment may be converging closer between 201302 ­
20170I. However, domestic reforms are needed to help economic recovery. In the medium term, non-oil
industrial production is expected to be main contributor to growth. In particular, agriculture and service
sectors are projected to grow by around 4 and 3 percent respectively. This could help increase employment
due to the job elasticity of those sectors. Nonetheless, for non-oil sector activity to fully pick up, foreign
direct investment (FDI) must recover, the economy has to reconnect with the international banking system,
and more progress needs to be made in implementing domestic reforms (World Bank, 2017)
4. Conclusion
This Special Focus compiles available evidence on recent trends in the labor market and provides several
possible explanations as to why economic growth was accompanied by limited employment growth
Gaining a better understanding of the employment-to-growth elasticity is imperative to the central challenge
of absorbing the masses of new entrants into the labor market in Iran. More in-depth empirical analyses arc
29
- 94 -

needed to validate hypotheses highlighted in this Special Focus and to develop a better evidence-based
understanding of the main policies needed to alleviate those constraints.
It documents one of the main challenges facing the Iranian economy today, which is facilitating much
needed job creation, especially for the country's young and highly educated workforce. The slow
recovery of the economy after 2014 has been associated with improvements in labor market outcomes.
However, the tremendous rise in the supply of educated labor in recent years, especially among females,
presents a new challenge in ensuring that high skilled job creation is sufficient to absorb the increased
number of educated labor market entrants.
It highlights the role that the service sector has played in generating employment from 2005 through
2017, as employment in tradable sectors significantly declined. For example, the share of female
employment in agriculture declined from 30 percent in 2005 to less than 22 percent in 2014. While men's
share in agricultural employment also dropped, it appears to have been somewhat compensated during that
period by a rising share of employment in the construction sector. With the slow recovery of the economy,
the service sector, particularly in government jobs, continued to be the main source of growth in job
opportunities. The industrial and agricultural sectors appear to have somewhat recovered after 2014, with
jobs primarily going to females in those two sectors.
Finally, it notes that small and medium sized enterprises appear to be not contributing enough to job
creation. Data from manufacturing firms indicates a decline in the number of SMEs between 2006 and
2013, resulting in a decline in the manufacturing share in total employment during the same period. Possible
hypotheses include expansionary policies that may have reduced the competitiveness oftradable industries,
the presence of labor market rigidities, and a challenging business environment.
30
- 95 -

REFERENCES
Assaad Ragui, Melanie Amtz. 2005. "Constrained Geographical Mobility and Gendered Labor Market
Outcomes Under Structural Adjustment: Evidence from Egypt." World Development 33(3): 431-454.
GholamReza K. Haddad, Nader Habibi. 2017. ''Why the youth are so eager for university education?
Evidence from Iran s labor market." Journal of Economic Studies 44 (3):.362-379
Djavad Salehi-lsfahani, Insan Tunali, and Ragui Assaad. 2009. "A comparative study of rctums to
education of urban men in Egypt, Iran, and Turkey." Middle East Development Journal 1(2): 145-187
Shanta Devarajan, Lili Mottaghi. 2015. "Economic Implications of Lifting Sanctions on Iran." Middle East
and North Africa Quarterly Economic Brief, (July). World Bank, Washington, DC.
World Bank. 2017. Iran Economic Outlook - April 2017." World Bank, Washington, DC. Accessible at:
http://pubdocs orldbank org/cn/84704149226602III5Iran-MEM20I7-ENG pdf
World Bank. 2018. "Doing Business 2018. Reforming to Create Jobs. Economy Profile of Iran." World
Bank, Washington, DC. Accessible at:
http // doingbusiness org/ _/media/WBG/DoingBusiness/Documents/Profiles/CountrIRN pdf
31
- 96 -

Annex 128
UNCTAD, “World Investment Report 2018 – Investment and New Industrial
Policies”, 2018
Excerpts: p. 1, p. 186

- 97 -

- 98 -

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT
uNcTAD /
INVESTMENT AND NEW INDUSTRIAL POLICIES
UNITED NATIONS
- 99 -

IE
FDI flows, by region and economy, 2012-2017 (continued)
FOi inflows
FOi outflows
Region/economy
2012
2013
2014
2015
2016
2017
2012
2013
2014
2015
2016
2017
77 454
2 068
62 006
7 635
24 682°
19 283
540
11 613
20 058°
10 497
13
1 200
10 022
44 441
11 679
13
1 956
2 179
52 418°
5 575
13
1 150
12 020
31 123°
1 687
13
1 100
7 816
27 922°
12 414
13
1 388
5 505
5
9
-1
43
34
44
46
170
41
12 600
54 197
86°
2 333
14 100
52 047
54°
2 152
10
-13
59 837
9135
39
8 368
32 366
47
1 293
49
57 453
15 493
50
8 900
35 598
38
1 599
14
73 475
4 809
49
9 200
41 439
44
1 551
32
62 746
5 624
43
11 800
51 180
163
2 235
17
24 196° 28 199° 34 582 44 064° 44 481 39 916°
8 486°
1679°
11 783°
5072°
11 304°
7 572°
4 662
3 050
2 105
2 050
3 372
5019
189°
120
104
1 356°
52
67
72
33 281
229
78
237
37 458
517°
198
2 806
1 375
25 506
519
880
304
82
64
22 584
516
490
25
53
40 698
3191
148
3
4 528
642
457
106
2 479
897
30 759
243
-6256
1 553
419
2 610
8 112
567°
396°
1 695
5 625
-19
2 630
13 956
356°
7 902
8 936
-45
2 746
12 964
212
65
45 623
532
227
16
16 648
1 981
934°
8 021
4 943
-48
3 536
8 828
1b
5 367
662
336°
4 023
5 390
73
4 811
16 692
4°
122
67
22 825
-394
242
83
-10 468
1 255
1 358°
6 748
5 396
187
6 670
11 736
12°
6 741
1 026
884°
1 840
4 402
29
4 106
2 536
5 032
1 665
301
2 628°
1 867
986
1 421
203
10 864
10 354
-270
1 680°
774
7 453
297
12 942
9 605
-561
228°
92
859
941
49 260
1 545
3 400
1 548
2 873
3111
1 365°
396
12 182
58
13 745
9 567
-531
361
71
1 333
933
39 558
3 729
-3120
1 947
1 434
2 661
1 612°
-840
8 865
176
13 463
9 765
-134
333°
30
1 868
894
31 458
1 519
-10 176
2 178
953
2 907
1 287°
1 040
8012
160
12 739
11 072
-233
298°
52
1 621
680
30 150
65
-7 574
1 600
311
2 353
2172°
1 071
8141
103
17 717
8551
15
9
5°
6°
190 090
179 645
170 603
169 233
139 698
151 337
41 941
34 599
31 038
35 627
9 337
17 328
23 652
875
157 356
15 324
119 834
9 822
126 866
5 065
119 870
11 759
95 151
3 260
104 206
11 857
18 086
1 055
19 359
890
24 734
1 921
6919
1 787
11 611
1 168
1 060
1 750
657
555
335
725
-33
89
80
2
2 230
3 092
-5 301
18 364
-606
81
-1 180
10 232
7 652
71
-7 433
6 254
4517
249°
26
1 351
5 135
3 690
287°
13 326
3 899
301°
14 515
4 218
309
134
29°
101
801
137
127
303
262
56°
78
62 713
6 730
14 518
606
212
356
6 769
-1
87
-125
67
671
-184
57 999
11 163
13 849
755
58
320
6 863
222
-743
89
85
107
76 098
28 100
15 039
567
294
697
11 788
174
2 242
53 564
21 168
16 209
727
214
252
9 800
188
3 460
73 370
24 262
16 167
772
255
412
4 441
164
2 328
64 291
19 541
11 736
1 322
122
306
8 272
278
920
5 973
2 680
-1 028
769
-68
1 068
4 294
752
2 373
399
1 041
2 234
23 390
15 654
2 288
5 563
2
0.3
79
159
0.2
180
173
5 083
80
114
154
-1
2°
6 147
3°
109
0.1
106
103
5 403
94
329
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274
186
World Investment Report 2018
lrwestment and New lndushial Policies

- 100 -

Annex 129
A. Sadeghi, “How Public Investment Could Help Strengthen Iran’s Growth Potential:
Issues and Options”, IMF Working Paper, WP/18/129, 8 June 2018

- 101 -

- 102 -

WP /18/129
IMF Working Paper
How Public Investment Could Help Strengthen Iran's
Growth Potential: Issues and Options
by Amir Sadeghi
IMF Working Papers describe research in progress by the author(s) and are published
to elicit comments and to encourage debate. The views expressed in IMF Working Papers
are those of the author(s) and do not necessarily represent the views of the IMF, its
Executive Board, or IMF management.
INTERNATIONAL MONETARY FUND
- 103 -

© 2018 International Monetary Fund
WP/18/
IMF Working Paper
Middle East and Central Asia Department
How Public Investment Could Help Strengthen Iran's Growth Potential: Issues and
Options
Prepared by Amir Sadeghi
Authorized for distribution by Catriona Purfield
Month April
IMF Working Papers describe research in progress by the author(s) and are published to
elicit comments and to encourage debate. The views expressed in IMF Working Papers are
those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board,
or IMF management.
Abstract
Public investment is key to growth in developing, oil-exporting countries, and oil revenue is an
important source of finance for public investment. Looking at various approaches (gradual,
aggressive, and conservative) to scaling up public investment in Iran under different oil price
scenarios (baseline and adverse), this paper shows that because of absorptive capacity constraints
and investment inefficiencies, the growth impact of an aggressive strategy is not significantly
different from a conservative or a gradual design. Meanwhile, its costs, in terms of fiscal
adjustment, are significantly higher, especially during periods when oil prices are low.
Furthermore, an improvement in investment efficiency has a significant positive impact on growth
outcomes and leads to higher private consumption and investment. Introducing an oil fund, on the
other hand, can help contain the size of fiscal adjustments, although it results in a larger
appreciation of real exchange rates and deterioration in the current account balance.
JEL Classification Numbers: E22; E62; H60; Q32
Keywords: Public Investment; Growth; Oil Revenue; Investmet Efficiency; Iran
Author's E-Mail Address: [email protected]
* I am grateful to Olivier Basdevant, Selim Cakir, Christoph Duenwald, Giovanni Melina, and Catriona Purfield, for
their comments and suggestions.
- 104 -

2
CONTENT
PAGE
Abstract
-------------------------------
1. Introduction
-----------------------------
3
IL The model
S
111. Calibration
6
IV. Assessing the Growth Impact of Scaling-Up Public Investment in Iran
8
A. Baseline vs. Adverse Scenario
8
B. Improvement in Public Investment Efficiency
9
C. The Potential Role of An Oil Fund
9
V. Conclusion
I 0
Appendix
15
References
22
FIGURES
Figure I. Weak Growth and Low Public Investment
}
Figure 2. Baseline vs. adverse scenario. Y-axis is in percent deviation from the steady-state path
unless stated otherwise.
12
Figure 3. Baseline vs. adverse scenario (continued). Y-axis is in percent deviation from the
steady-state path unless stated otherwise.
13
Figure 4. Aggressive investment scheme and baseline oil price scenario. Y-axis is in percent
deviation from the steady-state path unless stated otherwise.
14
TABLES
Table I. Calibration of Key Parameters for lran
l I
- 105 -

3
I. INTRODUCTION
Since the early 2000s, growth in Iran has been insufficient to improve real GDP per capita
incomes. Sanctions and negative oil price shocks led to budget tightening and a contraction in
pro-growth spending. Investment in infrastructure has been cut in half since 2012 (Figure I).
Looking ahead, lower public investment could constrain Iran's growth potential. On the other
hand, it is possible that an increase in government revenue would be followed by an aggressive
scaling up of public investment.'
Figure I. Weak Growth and Low Public Investment
Impact of Low Oil Revenue on public Investment 1/
(Percent of GDP)
MN
toil revenue
public investment
10.0
00�-�-L
2000-11 ver age
2012-17 average
GDP per Capita Growth
(Percent)
"�---------------��
-·
-'2 �----------------�
Source IF WEO.
Note 1/ Public investment is net acquisition of nonfinancial assets in annual budget
The purpose of this paper is to analyze
how lran could increase its public
investment to achieve higher growth
while preserving a fiscally sustainable
path that avoids explosive and
unsustainable debt or excessively tight
tax policies that would be impossible for
the government to maintain in the long
run. Fundamentally, a relaxation of the
fiscal stance to finance a large temporary
increase in investment faces two hurdles.
First, scaling up too abruptly leads to
inefficiencies. For example, selected
projects may be of lower quality, making
the entire process more inefficient
(Pritchett, 2000; Dabla-Norris et al.,
2012, Gupta et al, 2014, Qu et al.,
2014). Second, increasing investment
requires building fiscal buffers, so that in
case of adverse shocks, such as an
unexpected decrease in oil revenue, the
investment plan could still be carried out
without compromising fiscal stability. Furthermore, scaling up investment may shift financial
resources from the private to public sector and have a distortionary effect by increasing interest
rates and crowding out private investment.
To that end, I define and examine multiple scenarios for investment scaling-up:(!) a "gradual"
scenario, in which investment would increase by 3 percent of GDP over four years and would
then remain stable at its I 0-year, pre-sanctions (2002-2011) average of 5.2 percent of GDP; (2) a
' Fiscal policy in developing. oil-exporting countries is usually procyclical (lzetzki and Vegh, 2008: Villafouerte
and Lopez-Murphy, 2010 Arezki and Ismail, 2010) and fiscal positions usually deteriorate during oil price booms
(or improve when oil prices decline). owing to expansions (contractions) in government expenditure beyond the
increase (decrease) in government revenue (Villafouerte and Lopez-Murphy, 2010).
- 106 -

4
"conservative" scenario, in which the same amount of increase in public investment takes place
over eight years, instead of four, before it reaches the same long-run level as in the gradual
scenario; and (3) an "aggressive" scenario that, in three years, leads to the highest level of public
investment in Iran in two decades, before stabilizing at the long-run level of 5 .2 percent of GDP.
I also define two oil price scenarios: In the "baseline" scenario, oil prices are assumed to reach
$55 a barrel by 2021, while under the "adverse scenario," oil prices never exceed $48 a barrel.
Finally, I examine investment in an "efficient" scenario, where it is assumed that the share of
nominal investment that turns into productive capital is larger, allowing us to study the growth
impact of structural reforms that improve public investment efficiency when oil prices are low. I
also look at the "oil fund" scenario, in which the government has an oil fund and can deplete it
completely. It enables us to analyze the impact of such a mechanism when oil prices are low.
2
While the analysis shows that scaling up investment is viable under all scenarios, since gross
debt remains on a declining path in the long run and accumulating wealth continues, the costs of
an aggressive strategy are considerable. An aggressive frontloading of public investment results
in 0.9 percentage points (pp) of higher growth, relative to the growth that can be achieved under
the gradual scenario. However, that comes at the cost of a 1 pp higher consumption tax rate than
what would be needed with the gradual approach
3
(2 pp in the adverse scenario) and 4 pp higher
accumulation rate of public debt in the short run (10 pp in the adverse scenario). Furthermore,
there will be a larger appreciation in the real exchange rate under the aggressive public
investment scenario, eroding the competitiveness of the tradables sector.
The costs are higher when aggressive public investment coincides with a period of low oil prices
(adverse scenario). However, the government is better off with an aggressive investment
approach when the oil price is persistently low, if it can improve the efficiency of public
investment. Alternatively, when public investment is twice as efficient as in the baseline, the
margin of growth, due to expansion in public investment, is larger: 2.1 pp vs. 1.0 pp in the
adverse scenario. Rising efficiency does not help with the size of fiscal adjustment that is
required to close the fiscal gap. Furthermore, government can also use the oil fund to decrease
the size of the adjustment needed to finance the scaling up of capital expenditures. If full
depletion of the oil fund is allowed, the increase in the consumption tax rate, which is needed to
close the fiscal gap, will be less than 0.3 pp (compared to 2 pp in the adverse scenario), and gross
debt will increase by only 1 pp (compared to 10 pp in the adverse scenario) because the
2
In the baseline, the model assumes government must maintain a minimum of 10 percent of GDP in the oil fund.
3
In this model, there are various fiscal tools that government can use to finance expansion in capital expenditure,
such as raising consumption or labor income taxes, cutting spending, cutting household transfers, or a combination
of these. Furthermore, the government can burrow domestically, internationally, or take concessional loans. In this
paper, I only use the consumption tax for fiscal adjustment because the difference in the impact of different
financing methods on the endogenous variables of the model, specifically on growth, remains limited. Moreover,
debt financing is not considered in this paper due to Iran's limited access to international financial markets.
- 107 -

5
government fully utilizes its financial assets. The depletion of the oil fund, however, comes with
other costs, such as large appreciation of the real exchange rate and current account deficit. It
will also make the economy more vulnerable to exogenous oil price shocks and compromises the
stability of the macroeconomy in the medium and long run. An oil fund is necessary to smooth
government consumption, and without one the swings in government revenue will transfer the
volatility in the global oil prices to the economy, especially if access to international debt
markets are limited (van der Ploeg, 2011).
The model has been previously applied to Mozambique (Melina and Xiong, 2013), Kazakhstan
(Minasyan and Yang, 2013), Chad (IMF, 2014), and to Cote d'Ivoire, Guinea, Liberia, and Sierra
Leone (Del~chat et al., 2015). A similar model has also been applied to Mongolia (Li et al.,
2017).
The remainder of the paper is organized as follows: Section II introduces the model and explains
its features that are important for analyzing the dynamics of growth and capital expenditure in
Iran. Section III discusses the calibration issues. The results are reported in Section IV, and
Section V concludes the paper.
II. THE MODEL
The paper employs a small open real economy model with fiscal policy, a la Melina et al. (2016)
The model has features of the debt model of Buffie et al. (2012) and the natural resource model
of Berg et al. (2013). It includes a resource fund and a range of fiscal tools, such as consumption
tax, income tax, and government spending, which is further divided into consumption,
investment, and transfers. The model also contains resource-abundant developing economy
features, such as absorptive capacity constraint and public investment inefficiency, which makes
the model suitable to study Iran. In the discussion below, I provide a non-technical explanation
of the model; technical details are included in the appendix.
The model contains two types of households: optimizing households, who own firms and receive
firm profits and can decide how much to spend each period and how much to save for the future,
and hand-to-mouth households, who spend all their earnings each period. Households consume a
basket of tradable and non-tradable goods and supply labor to both the tradable and non-tradable
sectors of the economy. By solving the household problem, I obtain the demand for goods and
labor supply.
There are three sectors in the economy: non-tradable goods, tradable goods, and an oil sector.
Non-oil sector firms maximize their profits in a perfectly competitive environment where they
determine their demand for labor and private capital, and the production function determines the
supply of goods. Firms depend also on public capital to produce goods. Private capital
accumulation is subject to adjustment costs. Furthermore, the gross return on capital is taxed,
although part of it is rebated to optimizing households in order to help the model capture the
distortions in developing countries that discourage firms from investing and match the relatively
- 108 -

6
low investment-to-GDP ratios observed in developing countries. Finally, productivity in the
tradable goods sector is subject to learning-by-doing externalities. The oil sector is assumed to be
exogenous, for simplicity. Under the assumption that oil production is capital intensive and much
investment is financed by foreign direct investment, oil output follows an exogenous process.
Under the assumption that oil price is given for Iran, it is set to be exogenous.
The government uses tax and oil revenues to finance public investment, purchases, and transfers.
It can also borrow domestically and internationally.
4
Government purchases contain non-tradable
and tradable goods, and the government consumption price index is similar to households. To
account for the fact that only a fraction of total public investment typically turns into productive
capital-either due to inefficiencies inherent in the investment process (Pritchett, 2000; Hulten,
1996) or because governments in developing, resource-rich countries usually spend beyond the
absorptive capacity of the economy during commodity price booms-the effective public
investment concept is introduced. This concept stipulates that as public investment increases, the
rate of expansion in effective public investment declines, reflecting the absorptive capacity
constraint.
The model also features an oil fund, which allows the government to save oil revenue that is
beyond what is needed in a period to close the fiscal gap. In this model, the fiscal imbalances can
be covered by withdrawing from the oil fund and using one or a combination of other fiscal
policy tools available in the model, such as changing the rate of consumption or income tax,
cutting or expanding public consumption, and reducing or expanding transfers to households.
Moreover, the model allows our analysis to impose a pre-determined ceiling on how much
consumption and income tax rates can be raised or a pre-determined floor on how much public
consumption and transfers can be cut. Finally, there are fiscal rules introduced in the model that
allow to control the speed of fiscal adjustments needed to close the fiscal gap.
III. CALIBRATION
The model is calibrated to Iran. The path for oil production starts at 4 million barrels per day and
increases to 5.5 million barrels by 2030. The oil price starts at $43 a barrel and increases to $55
by 2021. Under the adverse scenario, the oil price will never surpass $48 a barrel. The model is
annual, and the simulation period is 15 years, from 2016-2030. The baseline calibration reflects
the 2002-2011 average. Table 1, which appears later in the paper, summarizes the baseline
calibration, which includes the following elements:
National accounting. According to the IMF World Economic Outlook database, the 2002-2011
average trade balance is 2 percent of GDP, government consumption and public investment are
set at 11 and 2.2 percent of GDP, respectively, and private investment is set at 10 percent of
GDP. We opted to set the shares of traded goods at 50 percent in private consumption and 40
4
International borrowing is very limited for Iran and is not considered in this paper.
- 109 -

7
percent in government purchases, as government consumption typically constitutes a larger
component of nontraded goods than private consumption. The share of natural resources is
assumed to be 10.5 percent of GDP at the initial steady state.
Assets, debt and grants. Iran has no concessional or external commercial debt, and domestic debt
is 15.7 percent of GDP.
Interest rates. The annual interest rate on domestic debt is 15 percent. Consistent with stylized
facts, domestic debt is assumed to be more costly than external commercial debt. We fix the real
annual risk-free interest rate at 4 percent. The real interest rate on external commercial debt is 6
percent, and concessional loans are interest free. The annual real return on international financial
assets in the oil stabilization fund is set at 2 percent.
Private production. The labor income shares in the nontraded and traded good sectors is 45 and
60 percent, respectively. In both sectors, private capital depreciates at an annual rate of 10
percent. Following Berg et al. (2013), we assume a minor degree oflearning-by-doing
externality in the traded good sector: p?" = p¥" = 0.1. Also, as in Berg et al. (2010),
investment adjustment costs are set to
"T = " = 25.
Household preferences. The coefficient ofrisk aversion-CJ= 2.94- implies an inter-temporal
elasticity of substitution of 0.34. The model assumes a low Frisch labor elasticity of 0.10 ('1/J =
10). The labor mobility parameter is set to 1, and the elasticity of substitution between traded
and nontraded goods is x = 0.44. To capture limited access to international capital markets, we
set = 1 as in Buffie et al. (2012)
Measure of optimizing households. According to the Global Financial Inclusion Database
(FINDEX), 92 percent of Iranians who are at least 15 years of age had an account at a financial
institution in 2014, including 87 percent of women and 97 percent of men. This suggests that
only 8 percent of Iranian adults are hand-to-mouth, which means that in each period they spend
all they earn during that timeframe. However, to avoid potential overestimation, I set the share of
optimizing households to 0.75, implying that 25 percent of households spend all their income
each period.
Oil Sector. Oil production shocks are assumed to be persistent with = 0.9. Based on
Hamilton's (2009) estimates, we assume resource prices follow a random walk, so p?' = 1. The
royalty rate t is set to 85 percent after subtracting 14.5 percent share of national oil companies.
The royalty tax rate is calibrated to match the share of oil revenue in total revenues in the data.
Tax rates. The steady-state taxes on consumption, labor, and capital are chosen so that t =
0.06, ' = 0.10, and t" = 0.15, respectively.
Fiscal rules. The share of the oil fund is set to 10 percent of GDP, which is approximately $40
billion to $45 billion. Its balance cannot be negative. In the baseline calibration, I set the
minimum balance of the oil fund to 10 percent of GDP. In an alternative scenario, I let the oil
- 110 -

8
fund balance go to zero to see if it has any impact on the size of fiscal adjustment needed to
weather an adverse oil price shock. Fiscal adjustments can take place through changes in
consumption or income tax rates and cuts in government spending or transfers.
Public investment. In the baseline, public investment efficiency (share of investment turned into
actual capital) is set to 30 percent (E = 0.3). As an alternative scenario, I increase the efficiency
number to 60 percent and examine its consequences for the economy. The absorptive capacity
constraints start binding when public investment rises above 80 percent from its initial steady
state (7' = 0.80). The home bias for government spending v is set to 0.8. The smaller degree
of home bias in additional spending reflects that most of the goods are imported. The output
elasticity to public capital a is set at 0.25. The annual depreciation rate of public capital 6 is
set to 7 percent.
IV. ASSESSING THE GROWTH IMPACT OF SCALING-UP PUBLIC INVESTMENT IN IRAN
A. Baseline vs. Adverse Scenario
I calibrated the model to Iran and constructed three different scenarios for public investment
scaling-up.
5
Under the "gradual" scenario, investment increases by 3 percent of GDP over four
years, from 2.2 to 5.2 percent, and remains stable at 5.2 percent afterwards. Under the
"conservative" scenario, the same amount of increase in public investment takes place over eight
years, instead of four, before reaching the long-run level of 5.2 percent of GDP. Finally, the
"aggressive" scenario introduces a sharp increase in investment where capital expenditure
reaches 6.5 percent of GDP,
6
before stabilizing at the long-run level of 5.2 percent of GDP.
Furthermore, I define two oil price scenarios. In the "baseline," the oil price gradually increases
from $43 to $55 a barrel by 2021, and oil production, which is currently at 4 million barrels a
day, gradually increases to 5.5 billion barrels a day by 2021. To analyze the impact of a negative
oil price shock, I introduce an "adverse" scenario where the oil price will increase but does not
exceed $48 a barrel.
These scenarios illustrate the dilemma for Iran where demands may be high for a "big push" that
could entail costs-by requiring further adjustment down the road-and risks that reduce fiscal
buffers. An aggressive frontloading of public expenditures will result in a jump of 1 pp in the
5
While the model allows for us to solve for public investment endogenously, this paper analyzes an exogenously­
specified public investment path to incorporate historical information about Iran. For example, public investment
under all scenarios will converge to 5.2 percent of GDP, which is a 10-year average of public investment (in percent
of GDP) between 2002 and 2011. The highest level of public investment in the aggressive scenario, 6.5 percent of
GDP, is the highest level in Iran over the last two decades.
6
The level of public investment in 2008 (6.5 percent) is the highest level of public investment in Iran over the last
two decades.
- 111 -

9
consumption tax rate
7
(2 pp increase in the adverse scenario) to ensure that resources would still
be available to finance the investment plan, while preserving debt sustainability (
Figure 2).
Public debt jumps by 4 pp in the short run (10 pp in the adverse scenario), although it would still
be on a declining trend in the long run. Also, the accumulation of commercial debt by the
government to cover scaling-up expenses, after the resource fund has reached its lower bound,
will lead to higher interest rates.
At the cost of raising tax rates and debt accumulation, the cumulative (year-over-year) growth
for 2016-2019, which is the period when the path for aggressive growth is higher than gradual or
conservative growth, is only 0.9 pp higher than gradual scaling up (1.0 pp higher in the adverse
scenario), and it falls below gradual and conservative growth rates in the medium run, 2019-
2024, before converging to the steady state level at 5 percent (
Figure 3). There will be a larger appreciation in the real exchange rate, when public investment is
frontloaded aggressively, which causes concerns for government regarding its harmful impact on
competitiveness in the tradables sector. Increased prices and wages due to increased demand for
raw materials and labor in the non-traded goods sector will reinforce the "Dutch disease" effect
of natural resource exploitation (Sachs and Warner 1999, Van derPloeg, 2011).
B. Improvement in Public Investment Efficiency
The growth impact of public investment depends largely on the framework within which it is
deployed (Figure 4). In an alternative scenario, when public investment is twice as efficient as in
the baseline, economic growth is higher, in response to an expansion in public investment, 2.1 pp
vs. 1.0 pp in the adverse scenario. Improving investment efficiency could be a particular hurdle
for Iran, as the country still lacks the public financial management tools that ensure that
investment projects are evaluated based on a cost-benefit analysis and selected accordingly. Iran
could, therefore, consider first building up capacity to manage and absorb investment, a process
dubbed "investing in investment" (Collier, 2011, Berg et al., 2013). The overall quality of public
institutions is also crucial (Van der Ploeg and Venables, 2011, Arezki and Brueckner 2011,
Arzeki et al., 2011).
C. The Potential Role of An Oil Fund
The oil fund plays a crucial role in how macroeconomic variables respond to public investment
scaling-up (Figure 4). If full depletion of the oil fund is allowed, the increase in consumption tax
needed to close the fiscal gap will be less than 0.3 pp (compared to 2.0 pp in the adverse
7
In this model, there are various fiscal tools that government can use to finance expansion in capital expenditure:
raising consumption or labor income tax, cutting spending or transfers to households, or a combination of these. In
this paper, I only use the consumption tax for fiscal adjustment because the difference in the impact of different
financing methods on the endogenous variables of the model, specifically on growth, remains limited. Moreover,
debt financing is not considered in this paper due to Iran's limited access to international financial markets.
- 112 -

10
scenario), and gross debt will increase by only 1.0 pp (compared to 10.0 pp in the adverse
scenario). This results in the deterioration in the current account and larger appreciation of the
real exchange rate, hurting the tradables sector and contributing to Dutch disease. It will also
make the economy more vulnerable to exogenous oil price shocks and compromises the stability
of the macroeconomy in the medium and long run.
V. CONCLUSION
Looking at various approaches (gradual, aggressive, and conservative) to scaling up public
investment in Iran under different oil price scenarios (baseline and adverse), this paper finds that
while scaling up investment is viable under all scenarios, the costs of an aggressive strategy are
considerable. An aggressive frontloading of public investment results in 0.9 pp of higher growth,
relative to the growth that can be achieved under the gradual scenario. However, that comes at
the cost of a 1 pp higher consumption tax rate than what would be needed with the gradual
approach (2 pp in the adverse scenario) and 4 pp higher accumulation rate of public debt in the
short run (10 pp in the adverse scenario). Furthermore, there will be a larger appreciation in the
real exchange rate under the aggressive public investment scenario, eroding the competitiveness
of the tradables sector.
Structural reforms that improve the efficiency of public investment lead to larger growth margin,
due to expansion in public investment: 2.1 pp vs. 1.0 pp in the adverse scenario. Efficiency
improvements do not help with the size of fiscal adjustment that is required to close the fiscal
gap. On the other hand, the utilization of financial assets, saved in an oil fund, by government
helps to reduce the size of fiscal adjustments. Under the full depletion of the oil fund, the
increase in the consumption tax rate, which is needed to close the fiscal gap, will be less than 0.3
pp (compared to 2 pp in the adverse scenario), and gross debt will increase by only 1 pp
( compared to 10 pp in the adverse scenario). The depletion of the oil fund, however,
compromises the stability of the macroeconomy by making it vulnerable to oil price shocks.
Overall, preserving fiscal sustainability in the case of investment scaling-up is a complex task. It
puts pressure on government to increase taxes which can neutralize the impact of fiscal spending
on growth. It can also lead to higher debt, which can, through higher interest rates, crowd out the
private sector. To overcome these challenges and ensure that investment spending supports
sustainable growth, two policies could be considered. The first is to increase non-oil revenue.
This would help build space for development spending while preserving overall fiscal deficit
objectives. Furthermore, increasing domestic revenue would help reduce dependency on oil
revenue by increasing the share of current expenditure financed by domestic taxes and allowing
more oil revenue to fund public investment. The second suggested policy would be to strengthen
the government investment framework to improve the efficiency of investment spending.
Furthermore, bringing a long-term perspective to fiscal policy formulation, particularly through
the adoption of a medium-term fiscal framework, could be very important and helpful in
managing oil price shocks.
- 113 -

11
Parameter Value
Definition
Parameter Value
Definition
exp,are
0.24
Exports to GDP
p
0.90
Persist. of the mining production shock
imp,a
0.22
Imports to GDP
u
0....
0.50
User fees of public infrastructure
0.11
Govt. consumption to GDP
r'
0.10
Labor income tax rate
9'%..
0.02
Govt. investment to GDP
r°
0.06
Consumption tax rate
0.10
Private investment to GDP
r
are
•••
0.15
Tax rate on the return on capital
0.10
Natural resources to GDP
ho
Lower bound for the stabilization fund
10/0
0%...
0.40
Share oftradables in govt. purchase
K
1
Adjust. share by external commercial debt
ca.
0.50
Share of tradables in private consumption
1
1
Adjust. share by consumption tax
RF..
0.10
Stabilization fund to GDP
l2
0
Fiscal adjust. share by labor tax
»a.
0.16
Govt. domestic debt to GDP
3
0
Fiscal adjust. share by govt. consumption
b.
0.02
Private foreign debt to GDP
4
0
Fiscal adjust. share by transfer
dae
0.00
Concessional debt to GDP
&
0.5
Adjust. speed of consumption tax to target
0.00
Govt. external commercial debt/GDP
a.
&2
0.001
Consumption tax response to debt/GDP
0.00
9%are
Grants to GDP
&3
1
Adjust. speed oflabor tax to target
(R-1)
0.15
Domestic net real int. rate
¢4
0
Labor tax response to debt/GDP
(R--1)
0.02
Foreign net real int. rate on savings
4s
1
Adjust. speed of govt. consumption to target
(R' --1)
0
Net real int. rate on concessional debt
6
0
Govt. consumption to debt/GDP
(R! --1)
0.04
Net real risk-free rate
z
1
Adjust. speed of transfer to target
(Rt-1)
0.06
Net real int rate on external commercial debt
48
0
Transfer response to debt/GDP
n°
0
Elasticity of sovereign risk
%%.
Go
Floor on real govt. consumption
a
0.45
Labor income share in nontraded sector
noor
Go
Floor on transfer
a'
0.60
Labor income share in traded sector
r%
+ 0o
Ceiling on consumption tax
Mr
0.10
Depreciation rate of k"
T%a
+0o
Ceiling on labor income tax
8T
0.10
Depreciation rate of k'
V
0.6
Home bias of government purchases (SS)
PyT
0.10
Learning by doing in traded sector
y
0.8
Home bias for additional spending
pzT
0.10
Persist. in TFP in traded sector
a"
0.25
Output elasticity to public capital
KN
25
Investment adjust. cost, nontraded sector
6°
0.07
Depreciation rate of public capital
KT
25
Investment adjust. cost, traded sector
e
0.30/0.60
Steady-state efficiency of public investment
1/J
10
Inverse of Frisch labor elasticity
¢
25
Severity of absorptive capacity constraints
(J
2.94
Inverse of intertemporal elasticity of substitution
y'
0.80
Threshold of absorptive capacity
p
1
Intratemporal substitution elasticity oflabor
TO
0.85
Royalty tax rate on natural resources
6
0.75
Measure of optimizers in the economy
1
0po
Persist. of the commodity price shock
0.44
X
Substitution elast. b/w traded/nontraded goods
1
1
Elasticity of portfolio adjustment costs
Table 1. Calibration of Key Parameters for Iran
- 114 -

12
Baseline Scenario
Adverse Scenario
Oil Price (US dollar a barrel)
Oil Price (US dollar a barrel)
57
52
47
42
2015
2020
2025
2030
2015
2020
2025
2030
Public Investment (% dev)
300 �------------�
.c-
Public Investment (% dev)
300 �------------�
£=
1
2015
2020
2025
2030
2015
2020
2025
2030
Oil Revenue(% Total Revenue)
i­
Oil Revenue (% Total Revenue)
39
2015
2020
2025
2030
2015
2020
2025
2030
Total Public Debt(% GDP)
Total Public Debt{% GOP)
30 �-------------�
25
20
15
10 �---�----�---��
2015
2020
2025
2030
2015
2020
2025
2030
Consumption Tax Rate (%)
Consumption Tax Rate (%)
­
8.5
7.5
6.5
5.5
·_Tl
55
2015
2020
2025
2030
2015
2020
2025
2030
Oil Fund (% GDP)
Oil Fund (% GDP)
2015
2020
2025
2030
2015
2020
2025
2030
-aggressive -gradual -conservative
Figure 2. Baseline vs. adverse scenario. Y-axis is in percent deviation from the steady-state path
unless stated otherwise.
- 115 -

13
Baseline Scenario
Adverse Scenario
GDP Growth (%)
GDP Growth (%)
8
8
7
7
6
6
t
t
5
5
4
4
2015
2020
2025
2030
2015
2020
2025
2030
Non-Oil GDP Growth (%)
Non-Oil GDP Growth (%)
8
8
7
7
6
¢
6
t
"
4
t
5
A
5
4
4
2015
2020
2025
2030
2015
2020
2025
2030
Real Exchange Rate (% dev)
Real Exchange Rate (% dev)
0
­ ­
0
e­ ­
-5
-5
-10
-10
2015
2020
2025
2030
2015
2020
2025
2030
Private Investment (% dev)
Private Investment (% dev)
25
­
25
­
15
15
--
-5
5
2015
2020
2025
2030
2015
2020
2025
2030
Private Consumption (% dev)
Private Consumption(% dev)
15
15
10
10
0 e .or=
:1
0
�
�
-5
-5
2015
2020
2025
2030
2015
2020
2025
2030
Current Account Balance (% GDP)
Current Account Balance(% GDP)
:f�
­
: f
2015
2020
2025
2030
2015
2020
2025
2030
-aggressive gradual -conservative
Figure 3. Baseline vs. adverse scenario (continued). Y-axis is in percent deviation from the
steady-state path unless stated otherwise.
- 116 -

14
Pub. Investment Efficiency (%)
Consumption Tax Rate (%)
Real Exchange Rate (% dev)
je
2015
2020
2025
2030
2015
2020
2025
2015
2020
2030
2025
2030
Public Investment (% dev)
Oil Fund (% GDP)
Private Investment (% dev)
2015
2020
2025
2030
2015
2020
2025
2030
2015
2020
2025
2030
Oil Revenue (% Total Revenue)
GDP Growth (%)
Private Consumption (% dev)
;_fl
2015
2020
2025
2030
2015
2020
2025
20 30
2015
2020
2025
2030
Total Public Debt (% GDP)
Non-Oil GDP Growth (%)
Current Account Bal. (% GDP)
2015
2020
2025
2030 fl
2015
2020
2025
2030
2015
2020
2025
2030
-baseline -·oil fund efficient
Figure 4. Baseline is an aggressive investment scheme under an adverse oil price scenario. Y­
axis is in percent deviation from the steady-state path unless stated otherwise.
- 117 -

15
APPENDIX
The appendix explains the model in details.
A. Household
There are two types of households. A fraction (A) receive firm profits and have access to capital
market (optimizers), and the rest, 1-, are hand-to-mouth households who spend what they
earn each period (non-optimizers).
Consumption
Both types of households consume a CES basket of tradable and non-tradable goods
X
[ 1 -1
1
x-1]x-1
c=like''j+(-«re?yr'
()
where x denotes the intertemporal elasticity of substitution and qp the degree of home bias.
Under the assumption that composite consumption is numeraire and that the law of one price
holds for traded goods, and St is the relative price of traded goods to composite consumption, the
CES basket implies that the price of one unit of composite consumption is
1
1= [w(p)'-x+(1-q)(s,)' X- (2)
Labor
Households supply labor to both traded and non-traded goods sectors where there is imperfect
labor mobility
where ~ is the share of labor in the non-tradables sector in the initial steady state and p > 0
governs labor sectoral mobility. The real aggregate wage rate is given by
1
w, =[6("P +(1- 6)(w[)'P+7. ()
Non-Optimizer Household
The representative non-optimizer maximizes the following utility function
- 118 -

16
1
%eNo
U(eNo [No -= (eNo-o (IN+W(5)
t
··t
1-o
1+b '
subject to the following budget constraint
where t and t' are consumption and income tax rates, m' is remittances, z is government
transfers, u is user fee for consumption of public (capital) services, k
Optimizer Household
The representative optimizing household maximizes the following discounted present-value
utility function
subject to the following budget constraint
(1+t~)c +b, + sbl
=(1-)w,l? +ib+ i-sb;_, +n +n{ +sa; +z-uk, (8)
where b and b' are domestic and foreign bonds owned by optimizing household, which pay
interest after one period at i and i rates, Q' is profit households receive from firms in the
tradables and non-tradables sectors. Furthermore, the model includes tax rebates on taxes levied
on capital return and an adjustment cost associated with foreign assets and liabilities, b*.
8
the
parameters in the utility function er, l/J are the inverse elasticity of intertemporal substitution for
consumption and labor supply, Kand fl are disutility weight on labor and a subjective discount
factor. Ea is expectation operator that along with ~ calculate the present discounted value of all
the expected future utilities.
B. Firm
There are two types of firms, a firm that produces tradable goods and one that produces non­
tradables.
9
Both types of firms use labor, private and public capital.
8
Including tax rebates and portfolio adjustment costs improve the model to match the data better. It also ensures
stationarity as discussed in Schmidt-Grobe and Uribe (2003).
9
Natural resource is assumed to be exogenous.
- 119 -

17
Non-Traded Goods Sector
The non-tradables sector is perfectly competitive, and the representative firm uses the following
production technology:
where z" is productivity parameter and a" > 1 is output elasticity with respect to public
capital. Constant returns to scale is assumed for other production inputs, labor and private
capital."
The law of motion for private capital includes investment adjustment costs
I
NT(·NT
)2]
r=a-Ne"r.+1'.1
t" (o)
t
t-1
2
·NT
t
t--1
i}" represents investment expenditure in the non-tradables sector, 6NT is capital depreciation
rate, and c" > 0 is a cost adjustment parameter.
The representative firm in the non-tradables sector maximizes the following discounted present­
value profit function weighted by the household's marginal utility ,1
0o
0o
s.) ea"-e.)
et»r-«"- -+
,e, av
t=0
t=0
where r!""
=(1
a)p()
is the gross return on capital. The last term on the right­
kt_r
hand side captures the distortions in developing countries that discourage firms from investing. It
helps match the relatively low investment to GDP ratios observed in developing countries. for
simplicity, part of these taxes is rebated to optimizing households, who own the firms.
Traded Goods Sector
The tradables sector is also perfectly competitive, and the representative firm uses the following
production technology
Productivity in the tradables sector is subject to learning-by-doing externalities
109 See, for example, Baxter and King (1993) and Kamps (2004) for similar specifications.
- 120 -

18
tnzT =p'tnz! +p' tny! (13)
t
t-1
t-1
where p', " < 1 control the severity of Dutch disease (Matsuyama, 1992; Krugman, 1987)
Similar to non-tradables sector, private capital evolves according to
[
T
(
•
T
T> T
K
li
.T
! =(-
6':+I1\
z,
l (
and each firm maximizes its discounted present-value profit
0o
0o
5)
w -e.) «tat -an«-+re as
t=0
t=O
Natural Resource Sector
Under the assumption that natural resource production is capital intensive and there is significant
resource investment in developing, resource-rich countries financed by foreign direct
investment, oil production follows an exogenous process:
0
#-(#) @oo
where
p" < 1and e}ii.d.N(0,o[,) specifies the oil production shock. Under the
assumption that the country output is a small portion of global supply, oil price is assumed to be
exogenous which follows a similar process
where p?<1ands"ii.d.N(0,o;o) is the oil price shock. Moreover, oil price is relative to
foreign goods and so government oil revenue is
T? = s,Gp? y9) 018)
where t is the royalty rate."
This parameter is calibrated such that simulated data match the ratio of resource revenue to total government
revenue.
- 121 -

19
C. Government
Using capital letters for aggregate level, the flow government budget constraint is
where C, = c? + (1- )c!',L, = l}? +(1- @)l', F is the asset value of the oil fund
earning a constant real interest rate r, A' is foreign aid, G, is government purchases, including
government consumption cf and government investment Cl, with a relative price to composite
consumption of goods of p[', and Z, is aggregate transfers to households. B is net aggregate
government debt which includes three types of debt: 1) external concessional debt, 2) external
commercial debt, and 3) domestic debt b.
Government Purchases
Government purchases (a combination of public consumption Gf and public investment Ci) are
a CES basket of traded and non-traded goods
X
x-1
[ .!
1
x-1ix-1
G= w}(cj+(-v,7(c9)' (20)
with the same elasticity of substitution between tradables and non-tradables as private
consumption. Government consumption price index, in terms of composite consumption basket,
is also similar to household's
p = [v(p!")'-¥+(1- 0)Gs,)!X-7 (21)
1
where Vt denotes the degree of home bias and since this analysis focuses on the expansion in
public investment, the degree of home bias for additional government spending, v, can be
different from its steady-state value v,
Public Investment Efficiency and Absorptive Capacity Constrain
According to literature, public investment usually fails to meet the expected growth in
developing countries-either due to of inefficiencies inherent in the investment process
(Pritchett, 2000; Hulten, 1996) or because governments in developing, resource-rich countries
usually spend beyond the absorptive capacity of the economy during commodity price booms.
To incorporate this feature into the model, effective public investment G{ is introduced as a
function of public investment G},
- 122 -

20
GI sGI
f
' Y%
= (23)
:f
G! sGI
Y
I
Where y}(= 5' -1) is the public investment growth rate, relative to its steady-state value. € €
[0,1] represents steady-state efficiency and e(y) € (0,1] governs the efficiency of the portion
of public investment exceeding a threshold ', in percent of deviation from the initial steady
state. Furthermore, e(y!) takes the following form
where the parameter , € [0, 0o) adjusts the binding degree of absorptive capacity constraint.
The law of motion of public capital is
where
~ is public capital depreciation rate.
£ =(-6£, + G}(25)
The Oil Fund and the Fiscal Gap
Introducing an oil fund allows to save the oil revenue that is beyond what is needed to close the
fiscal gap in a period,
{
Fin Fout}
F; -F =max Foo -F',(F'_,-F)+-'+- '(27)
St
St
where Fro is the minimum balance that government chooses to maintain, F} and F9'
represent the fiscal revenue (including oil revenue) and expenditure, such that fiscal deficit
(surplus),
can be covered by withdrawing from (saving to) the oil fund, F," -F'_,
Furthermore, a fiscal deficit can be covered by one or a combination of other fiscal policy tools
available in the model, such as raising the consumption or income tax, cutting public
consumption, and/or cutting transfers to households. Moreover, the model allows one to impose
a set of exogenous constraints on how much consumption and income tax rates can be raised or
As we will see later, by changing the minimum required balance we can explore the amount of adjustment needed
to close the fiscal gap, in response to scaling up investment and negative oil price shocks.
- 123 -

21
public consumption and transfers cut.
13
Finally, there are fiscal rules introduced in the model that
allow one to control the speed of fiscal adjustments needed to close the fiscal gap and how to
decide between domestic and external borrowing.
14
To close the model, the non-tradables market clears,
And current account balance is
where I, = IN" IT is total private investment, and Y = p''yNT +s,Y' + Y? is real GDP.
Such exogenously determined constraints reflect the feasibility of fiscal policy adjustments.
More details on fiscal rules and fiscal policy reaction functions are available in Melina et al. (2014).
- 124 -

22
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- 127 -

- 128 -

Annex 130
OHCHR, “Iran sanctions are unjust and harmful, says UN expert warning against
generalised economic war”, 22 August 2018

- 129 -

- 130 -

Iran sanctions are unjust and harmful, says UN expert warning
against generalised economic war
o heh r. o rg/ en/NewsEven ts/Pages/Dis playNews.a spx
GENEVA (22 August 2018) - Sanctions must be just, and must not lead to the suffering of
innocent people, says United Nations Special Rapporteur Idriss Jazairy.
"The reimposition of sanctions against Iran after the unilateral withdrawal of the United States
from the Iran nuclear deal, which had been unanimously adopted by the Security Council with
the support of the US itself, lays bare the illegitimacy of this action," Mr. Jazairy observed.
"This illegitimacy was confirmed by the opposition of all other permanent members of the
Security Council and indeed of all international partners. The UN Charter calls for sanctions to
be applied only by the UN Security Council precisely to ensure such wanton attacks on nations
are avoided.
"International sanctions must have a lawful purpose, must be proportional, and must not harm
the human rights of ordinary citizens, and none of these criteria is met in this case," the UN
expert stressed.
"These unjust and harmful sanctions are destroying the economy and currency of Iran, driving
millions of people into poverty and making imported goods unaffordable," Mr. Jazairy stressed,
while questioning whether the United States would provide food and medicines to the millions
of Iranians no longer able to afford them.
"The current system creates doubt and ambiguity which makes it all but impossible for Iran to
import these urgently needed humanitarian goods. This ambiguity causes a 'chilling effect' which
is likely to lead to silent deaths in hospitals as medicines run out, while the international media
fail to notice," Mr. Jazairy said.
"I appeal to the United States to demonstrate its commitment to allow agricultural commodities,
food, medicine, and medical devices into Iran by taking real and concrete steps to ensure that
banks, financial institutions and companies can quickly and freely be assured that relevant
imports and payments are permitted," he said.
The expert applauded efforts by the international community to reject economic bullying. "I am
grateful for the efforts of the European Union in tackling this injustice, both through diplomatic
efforts and through legislation to protect European companies from American sanctions. I
sincerely hope that the international community can come together to see that the world does
not become a battleground for generalized economic war," said Mr. Jazairy.
112
- 131 -

The expert highlighted the
UN Declaration on Principles of International Law concerning Friendly Relations and
Cooperation among States in accordance with the Charter of the United Nations, which urges
States to resolve their differences through dialogue and peaceful relations, and to avoid the use
of economic, political or other measures to coerce another State in regard to the exercise of its
sovereign rights.
These unilateral sanctions, together with other recent developments led the Expert to warn
against the generalisation of economic war at the world level.
ENDS
Mr. Idriss Jazairy was appointed by the Human Rights Council as the first Special Rapporteur on the
negative impact of the unilateral coercive measures on the enjoyment of human rights. He took office
in May 2015. Mr. Jazairy has extensive experience in the fields of international relations and human
rights with the Algerian Foreign Ministry, the UN human rights system and international NG Os. He
holds a M.A. (Oxford) in Philosophy, Politics and Economics, and an M.P.A. (Harvard). He also
graduated from the Ecole nationale d'Administration (France). Mr. Jazairy is the author of books and
of a large number of articles in the international press on development, human rights and current
affairs.
The Special Rapporteurs are part of what is known as the
Special Procedures of the Human Rights Council. Special Procedures, the largest body of independent
experts in the UN Human Rights system, is the general name of the Council's independent fact-finding
and monitoring mechanisms that address either specific country situations or thematic issues in all
parts of the world. Special Procedures' experts work on a voluntary basis; they are not UN staff and
do not receive a salary for their work. They are independent from any government or organization
and serve in their individual capacity.
212

- 132 -

Annex 131

OIETAI, “Report on a decrease in foreign investment due to the re-imposition of the
U.S. sanctions”, December 2018

- 133 -

- 134 -

OIETAl's Report on A Decrease in Foreign Investment Due to the Re-imposition of
the US Sanctions
The Statistics of Approved Foreign Investment Proposals
Approved Foreign Investment
Growth Rate of Spring 2018
Proposals
Term
Approved
In Terms of the
In Terms of the
Number of
Investment
Number of
Approved
Proposals
Amount (USO
Proposals
Investment
million)
Amount
Spring 2018
20
154
-
-
Winter 2018
72
2680
-72.2%
-93.5%
Autumn 2017
46
4418
-56.5%
-96.5%
Summer 2017
37
2820
-46%
-94.5%
Spring 2017
24
902
-17%
-82.9%
The Number of Approved Foreign Investment Proposals
80
70
60
72
so
37
40
30
20
10
0
Spring 2017
Summer 2017
Autumn 2017
Winter 2018
Spring 2018
The Amount of Approved Foreign Investment Proposals (USO million)
SOOD
4418
4500
4000
3500
3000
2500
2000
1500
1000
SOD
0
Spring 2017
Summer 2017
Autumn 2017
Winter 2018
Spring 2018
- 135 -

Approved Foreign Investment
Growth Rate of Spring 2018
Proposals
Term
Number
The Amount of
In Terms of the
In Terms of the
of
Approved
Number of
Approved
Proposals
Investments (million
Proposals
Investment
USD)
Amount
Triennium
170
7100
-
-
before JCPOA
Triennium after
382
24700
125%
248%
JCPOA
Total Number of Approved Foreign Investment Proposals
450
400
382
350
300
250
200
170
150
100
so
0
Triennium before JCPOA Triennium after JCPOA
Total Amount of Foreign Investment Proposals (million USD)
30000
24700
25000
20000
15000
10000
7100
5000
0
Triennium before JCPOA Triennium after JCPOA

- 136 -

Annex 132
IMF, “World Economic Outlook: Challenges to Steady Growth”, October 2018
Excerpts: p. 1, p. 65

- 137 -

- 138 -

World Economic and Financial Surveys
World Economic Outlook
Challenges to Steady Growth
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
INTERNATIONAL MONETARY
FUND

- 139 -

CHAPTER 1 GLOBAL PR0SPECS AND POLICES
Annex Table 1.1.5. Middle East, North African Economies, Afghanistan, and Pakistan: Real GDP, Consumer Prices, Current
Account Balance, and Unemployment
(Annual percent change unless noted otherwise)
Real GDP
Consumer Prices'
Current Account Balance
Unemployment
Projections
Projections
Projections
Projections
2017 2018 2019
2017 2018 2019 2017 2018 2019
2017 2018 2019
Middle East, North Africa, Afghanistan,
and Pakistan
2.2
2.4
2.7
6.4
10.8
10.2
-0.7
1.8
1.9
Oil Exporters"
1.2
1.4
2.0
3.6
9.8
9.9
1.6
4.7
4.8
Saudi Arabia
-0.9
22
24
-0.9
26
2.0 22
8.4
88
6.0
Iran
3.7
-1.5 -36
9.6
29.6 34.1
22
1.3
0.3
11.8
12.8
14.3
United Arab Emirates
0.8
29
37
20
35
1.9
6.9
72
7.5
Algeria
1.4
25
27
5.6
65
67 -13.2
-9.0 -7.9
11 7
11 6
12.3
Iraq
-2.1
1 5
65
0.1
2.0
2.0
2.3
69 31
Oatar
1.6
2 7
28
0.4
3.7
35
3.8
4.8
66
Kuwait
-3.3
23
41
1.5
0.8
3.0
5.9
11.3
11.0
1.1
1.1
1.1
0il Importers°
4.1
4.5
4.0
12.4
12.9
10.8
-6.6 -6.5 -6.1
Egypt
4.2
53
55
235 209
14.0
-6.3 -2.6 -24
122
10.9
99
Pakistan
5.4
58
4.0
41
39
75
-4.1
-59 -5.3
6.0
61
6.1
Morocco
4.1
32
32
0.8
2.4
1.4
-3.6 -4.3 -4.5
10.2
9.5
9.2
Sudan
1.4 -2.3 -1.9
32.4 61.8
49.2 -10.5 -14.2 -13.1
19.6
19.5
19.6
Tunisia
2.0
2.4
29
5.3
8.1
75 -10.5
-9.6 -8.5
15.5
15.2
15.0
Lebanon
1.5
1.0
14
4.5
65
35 -22.8 -25.6 -25 5
Jordan
2.0
23
25
3.3
4.5
23 -10.6
-9.6
-8.6
18.3
Memorandum
Middle East and North Africa
1.8
20
25
6.7
11.8
10.6
-0.3
2.6
2.6
Israel
33
36
35
0.2
09
1.3
29
2.3
23
4.2
39
3.9
Maghreb
5.6
32
3.4
5.3
6.7
6.0
-8.0
-6.6 -5.8
Mashreg
3.9
48
50
20.8
18.8
12.6
-9.5 -72
-6.6
Note: Data tor some countries are based on fiscal years. Please refer to Table F in the Statistical Appendix tor a list of economies with exceptional reporting periods
Movements in consumer prices are shown as annual averages. Year-end to year-end changes can be found in Tables A6 and A7 in the Statistical Appendix
·Percent of GDP
·Percent. National definitions of unemployment may differ
Includes Bahrain, Libya, Oman, and Yemen
Includes Afghanistan, Djibouti, Mauritania, and Somalia. Excludes Syria because of the uncertain political situation.
Israel, which is not a member of the economic region, is included for reasons of geography but is not included in the regional aggregates
The Maghreb comprises Algeria, Libya, Mauritania, Morocco, and Tunisia
The Mashreq comprises Egypt, Jordan, and Lebanon. Syria is excluded because of the uncertain political situation.
International Monetary Fund [ October 2018
65
©International Monetary Fund. Not for Redistribution

- 140 -

Annex 133
World Bank, “Q&A on the key economic impacts of Iran deal”, 10 August 2015

- 141 -

- 142 -

Q&A on the key economic impacts of Iran deal
Q wonuo a
FEATURE STORY
Q&A on the key economic impacts of
Iran deal
August 10, 2015
This page in: Englist
w (http:/www.albankaldawii.org/artnewfeature2015/07/27/q--0n-the-key-economic4rm…)
Lui+ eui rut cu
•
o
f
In
Ol pump on background of flag of Iran
«
Anton watman l Shutterstock.com
STORY HIGHLIGHTS
Iran's return to the global oil market could lower world oil prices by as much as 14%
Domestic growth should surge from 3% this year to 5% in 2016.
Oil and non-oil trade to and from Iran should eventually increase by US$17 billion.
ran's agreement to decelerate its nuclear program should bring most US and European sanctions
against the country to an end. What will this mean for the global economy? And for lran itself?
The World Bank's Chief Economist for the Middle East and North Africa, Shanta Devarajan
(http://www.world bank.org/en/about/people/shanta-devarajan), explains:
Q. What economic impact will the lifting of sanctions have on Iran?
A. The main effect will be the increase in lran's oil exports, which had declined by about 1 million barrels
a day following the tightening of EU sanctions in 2012. We expect it will take about a year for ran to get
its exports back to pre-2012 levels. Even in the short run, Iran could start selling the 30-40 million barrels
of crude oil and condensate that it has stockpiled in the Persian Gulf. This will give a boost to the Iranian
economy, which was in recession in 2012/13, and is only slowly recovering. We expect growth next year
to be about 5%, significantly higher than this year's 3% and the negative growth of the previous two
years.
- 143 -

Q&A on the key economic impacts of Iran deal
In addition, the lifting of sanctions will lower Iran's trade costs (one of the sanctions was an embargo on
firms that provided insurance and credit to Iranian firms), increasing Its oll and non-oll trade. We
estimate that, eventually, Iran's trade will increase by about US$17 billion, which is about 3.5% of its
GDP. The automotive and pharmaceutical companies could get a significant boost as both had recently
suffered from being unable to import parts and machinery.
Finally, with the oil sector expanding. we expect that foreign direct investment in Iran will increase to
around US$3 billion a year, which is double the current rate but still lower than its peak in 2003.
Q, What impact may it have on Iranian society?
A. We have not done a full analysis on the impact on Iranian society. But some of our analysis indicates
that, during the sanctions era, female unemployment rates increased and labor force participation fell.
The lifting of sanctions may reverse this trend, since the additional foreign currency in the market will
typically give a boost to the services sectors, which tends to hire more females (because of a better
match with their skills and preferences). However, the foreign-exchange windfall needs to be managed
carefully so that it leads to sustained employment growth in Iran.
Q. And what impact will it have on the Middle East region as a whole?
A. The addition of a million barrels a day of Iranian oil will, assuming no strategic response by other oil
producers, have the effect of lowering the world oil price by 14%, or US$10 a barrel. In turn, this will
lower the export earnings and fiscal revenues of the region's oil exporters, such as the GCC and Libya,
while benefiting the region's oil importers, such as Egypt and Tunisia.
Q. A drop of Us$10 a barrel is a huge drop in the global oil price: why would it be so sharp?
•
A. The world's demand for oil is quite inelastic, which is usually interpreted as a large increase in price
having only a mild effect on demand. But this same inelastic demand means that a small change in
supply has a big effect on the price. As pharmaceutical industries use oil as a raw material, countries
such as the US, UK and Israel would profit from cheap )oil.
o
0. You mention the risk of a strategic response from other key oll exporters to Iran's return to
the international oil market. What are they likely to do?
f
In
We assume no strategic response in our simulations of the impact of an increase in Iranian oil exports
on world prices. This is realistic since very few oil exporters can vary their production in the short run.
And the few that can, such as Saudi Arabia, chose not to do so earlier this year when the price of oil fell
by about 50%.
«
RELATED
WORLD BANK
Report Page (http://www.worldbank.org/en/region/mena/ publication/mena-quarterly-economic-brief-July-2015)
Press Release (http://www.worldbank.org/en/news/press-release/2015/08/10/iran-lifting-…­
and-boost-domestic-economy-if-managed-well)
Highlights (PDF) (http://pubdocs.wordbank.org/pubdocs/publicdo/2015/7/7688214375966401 10/ran-QEB-Highlights­
English-Final.pad
ran (/er/country/ran)
Home (/en/region/mena)
2

- 144 -

Annex 134
S. Mufson, “What ending sanctions on Iran will mean for the country’s economy”,
The Washington Post, 12 August 2015

- 145 -

- 146 -

The Washington Post
Business
What ending sanctions on Iran will mean for the
country's economy
By Steven Mufson
August 12, 2015
The end of economic sanctions on Iran would mean a 14 percent drop in world oil prices and
a $15 billion boost in Iranian oil revenue, according to a World Bank report.
The report said that lifting sanctions - which would give Iran access to frozen assets the
Obama administration estimates at roughly $56 billion - would create a "windfall" that Iran
could use to resurrect its oil fields, revive domestic industries such as auto and
pharmaceutical manufacturing, and reduce widespread unemployment.
Additional help for Iran's economy could come from foreign investment, which the World
Bank predicted would climb to as much as $3.5 billion in a couple of years, double this year's
level but still below the peak in 2003.
"With the lifting of sanctions, the government of Iran has the opportunity to put in place a
policy framework that will enable the economy to make maximum use of this windfall and
put the economy on a path of sustained economic growth," the report said.
The report, the latest quarterly brief published by the bank's Middle East and North Africa
division, also said that the end of sanctions on Iran's oil exports would hurt other oil
exporters, including Iran's regional rival, Saudi Arabia. The bank estimates that Iran's return
to crude oil markets could lead to annual losses of $40 billion for Saudi Arabia and $5 billion
for Libya.
As President Obama strives to win congressional support for the accord limiting Iran's
nuclear program, the impact oflifting economic sanctions has become a controversial
component of the plan. Critics of the deal fear that Iran will lose its incentive to stick to the
accord and might use its windfall to finance its proxies throughout the region, including U.S.
foes such as Hezbollah, Houthi forces in Yemen, Shiite militias in Iraq and Syrian President
Bashar al-Assad.
In an Aug. 5 speech at American University, Obama argued that "the truth is that Iran has
- 147 -

always found a way to fund these efforts, and whatever benefit Iran may claim from sanctions
relief pales in comparison to the danger it could pose with a nuclear weapon."
But he also sought to calm those fears about how Iran would use its windfall. "The notion that
this will be a game-changer with all this money funneled into Iran's pernicious activities
misses the reality of Iran's current situation," he said. "Partly because of our sanctions, the
Iranian government has over half a trillion dollars in urgent requirements, from funding
pensions and salaries to paying for crumbling infrastructure."
The president said that "even a repressive regime like Iran's cannot completely ignore" the
expectations of its people, and "that's why our best analysts expect the bulk of this revenue to
go into spending that improves the economy and benefits the lives of the Iranian people."
Oil industry experts say that eventually Iran's oil exports could triple to about 3 million
barrels a day, which the World Bank said would require major investments.
The oil and gas sector's needs are part of a broader need for large investments. The report
estimated that investment is about $20 billion a year below the level for the economy to grow
strongly. It said Iran's leadership would have to "avoid the temptation to spend large parts of
the windfall on consumption" and avoid spending on wasteful projects. It cited gasoline
subsidies and vast subsidized housing developments.
The report gave a nuanced picture of how sanctions have hurt the Iranian economy in recent
years. It estimated that the tightening of U.S. and European Union sanctions led to a loss of
$17.1 billion in export revenue from 2012 to 2014, the equivalent of 4.5 percent of Iran's gross
domestic product.
The economy contracted at a rate of 6.8 percent in 2012 and 1.9 percent in 2013, but it
rebounded in 2014 in part thanks to reforms undertaken by President Hassan Rouhani.
Foreign direct investment has also plummeted and is likely to return only slowly. The bank's
report said foreign direct investment tumbled from $4 billion in 2010 to "a complete halt in
2012" and still amounts to less than $2 billion.
The report added that "the decline in foreign investment hurt the oil industry the most, as
sanctions cut Iran's access to technology, knowhow and investment."
But other areas of the economy have also been hurt and could revive. After sanctions were
tightened, automobile production fell to 700,000 cars from 1.6 million. Pharmaceutical
- 148 -

exports worth $2.5 billion prior to 2012 have tumbled but could resume.
Ending sanctions would also lower trade costs caused by the need to entice buyers willing to
sidestep the sanctions regime. The bank said those costs have sometimes amounted to a third
of the value of Iran's exports.
However, Iran's currency will also gain strength once a nuclear agreement is in place, and
that will make the country's exports less competitive.
fey 4 Comments
Steven Mufson
Steven Mufson covers energy and other financial matters. Since joining The Washington Post in 1989, he
has covered economic policy, China, U.S. diplomacy, energy and the White House. Earlier he worked for
The Wall Street Journal in New York, London and Johannesburg. Follow 'JI
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- 149 -

- 150 -

Annex 135
C. Lyttle, “FDI in Iran soars with sanctions relief”, Financial Times, 20 June 2016

- 151 -

- 152 -

FDI in Iran soars with sanctions relief - Financial Times
Giranladabell.wordpress.com/2016/08/01/fdi-in-iran-soars-with-sanctions-relief-financial-times
August 1, 2016
The withdrawal of many economic and financial sanctions in Iran has reopened the county's
economy to a stream of new investments.
Data from fDi Markets, an FT service that monitors cross-border greenfield investment, shows
that before the lifting of sanctions, Iran was ranked 12th out of the 14 Middle East nations for
FDI between January 2003 and December 2015, equating to a market share of 1.62 per cent.
Since sanctions were lifted this year, Iran has climbed to number three in the rankings, with a
market share of 11.11 per cent, placed only behind regional powerhouses the United Arab
Emirates and Saudi Arabia.
Agreement to lift sanctions, in exchange for a significant reduction in Iran's nuclear operation,
was initially reached in July 2015. But implementation did not occur until January 2016.
Lifting sanctions will unfreeze billions of dollars of overseas assets and allow oil to be sold
internationally; a restriction that has cost Iran more than $160bn in oil revenues since 2012.
Despite holding the second largest gas and fourth largest crude oil reserves globally,
Iran has
flagged behind other emerging Middle Eastern countries.
Global investment into Iran has been steadily increasing since 2013, a year in which the country
attracted just three FDI projects. This increased to eight in 2014 and nine in 2015.
It was in the first quarter of 2016, however, that the impact of sanction relief became evident.
Iran won 22 FDI projects during the quarter, the highest rate of investment since fDi Markets
began recording data in 2003.
Job creation and capital expenditure also rose between 2013 and 2016. Some 352 jobs were
created in 2013 with capital expenditure of $79m, rising in 2014 to 2,732 new jobs and capital
expenditure of $1.67bn.
Although 2015 showed a 48 per cent increase in capital expenditure overall, the first quarter
was notable in failing to attract any FDI projects, in stark contrast to the same period this year.
Predictably, Tehran attracted 36 per cent of recorded investments into the country during the
112
- 153 -

first quarter of 2016, and 40 per cent of all FDI into Iran since January 2013.
Q1 2016
22
3,489
5,376
2015
9
2,473
541
2014
8
1,670 2,732
2013
3
79
352
Source: fDi Markets includes
estimates
Q1 2016 SEES RECORD INFLOWS
Since the sanctions were lifted the leading sector for investment into Iran has been financial
services, which has attracted four investments from separate companies with capital
expenditure of $60m.
The country has also attracted investments from the automotive sector, business services,
consumer electronics and textiles, among others.
The principal countries investing in Iran during the period were South Korea and Germany,
which together committed to capital expenditure of $2.15bn.
South Korea-based steel producer Pohang Iron and Steel (Posco) has been the single largest
investor in Iran this year, with plans to invest $1.6bn to build an integrated steel mill in the
Chabahar Free Trade-Industrial Zone by March 2017. The company's subsidiary Posco Energy
also said it had entered a memorandum of understanding with Iran-based PKP to build a 500
megawatt off-gas power plant (using gas generated during steelmaking) nearby.
The upward trend recorded by fDi Markets suggests the economic rebound Iran is experiencing
is set to continue. Nineteen investors signalled an interest in future investments in the country,
representing an increase of 90 per cent from 2015.
Cara Lyttle is a research analyst at fDi Intelligence, an FT data service.
https://next.ft.com/content/549d0dac-36d6-11e6-9a05-82a9b15a8ee7
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- 154 -

Annex 136
“Iran without Sanctions: What has changed?”, Knowledge at Wharton,
13 December 2016

- 155 -

- 156 -

KNOWLEDGE@WHARTON
PUBLIC POLICY
Iran without Sanctions: What Has
Changed?
Dec 13, 2016
Arabic, Middle East &Africa, North America @ Law and Public Policy
January 16, 2016, marked "Implementation Day" in Iran - the day when
partial sanctions against the country were officially lifted in accordance with
the Iran nuclear deal. Called the Joint Comprehensive Plan of Action (JCPOA),
the agreement cleared the way for Iran to sell oil, trade goods and engage in
the banking sector in exchange for halting its nuclear program. The deal also
allowed the country to recover a portion of its frozen assets.
As the end of the year approaches, the question remains if the economy in Iran
has improved since then. From the outside, it seems like some progress is
being made: Just last week, Royal Dutch Shell announced it had signed a
memorandum of understanding with Iran's state oil company for future
exploration in the country, on the heels of a similar agreement between Iran
- 157 -

and France's Total SA for the development of a natural gas field. And this week,
Boeing and Iran Air announced a $16.6 billion deal for the delivery of 80
aircraft. Back in January, France's Airbus signed a provisional agreement with
Iran to deliver 118 aircraft and to oversee the renewal of the country's civil
aviation system. That deal is expected to be finalized in the coming weeks, with
the first delivery of jets expected just after the new year.
All of this is taking place in the wake of President-elect Donald Trump's
campaign rhetoric against Iran: He labeled the Iran nuclear agreement as one
of the worst deals the U.S. has ever negotiated. "It is true that Trump could
unilaterally withdraw the United States from the agreement .... It is not a treaty,
and foreign affairs are within the purview of the Executive," says Philip
Nichols, Wharton legal studies and business ethics professor. "But Trump will
have very little leverage over the Iranians to negotiate some sort of different
deal."
Great Expectations
Despite the recent announcements by Shell and others, the situation in Iran
has not changed drastically since partial sanctions were lifted. "The general
feeling is that people are frustrated because relief from sanctions [hasn't really
materialized]. Part of the disappointment results from expectations. People
thought the sanctions would be lifted and everything would be glorious right
afterward," says Kyle Olson, a Penn doctoral candidate in anthropology whose
research focuses on Iran.
Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, agrees. "Iran's
economic recovery was moving slowly, but steadily. Many people expected
sanctions relief to led to a gold rush, but it was always going to take time to
create momentum in a complicated marketplace," he notes. However, "what is
promising is that if you look at different indicators since January, all the right
players who were expected to return to the market have made headway, such
as Airbus, Total and Siemens."
Olson points out that there is still a large portion of Iranian assets that are
frozen in American banks because of violations including human rights abuses.
- 158 -

According to CNN, about $50 billion in frozen Iranian assets were freed up and
returned to Iran. According to Nichols, "Much of that money has gone into the
resumption of commercial relationships [ that existed] between Iran and
European businesses before the imposition of the nuclear sanctions."
"Trump will have very little leverage
over the Iranians to negotiate some sort
of different deal."
- Philip Nichols
The impact on trade also has been minimal so far. Other than for Boeing, "The
lifting of the nuclear deterrence sanctions has, predictably, had little effect on
direct exports from the United States, " Nichols notes. In fact, January to
September exports from the United States to Iran fell by about 5% compared to
the same period last year. "The numbers are so small that a 5% decrease is not
that large; it just demonstrates that the lifting of one set of sanctions did not
have much of an effect. Interestingly, exports from Iran to the United States
during the same periods increased from nothing to about $62 million from
2015 to 2016.
Will Trump 'Dismantle'?
Experts are unsure how Trump will approach the Iranian deal when he takes
over the Oval Office in the beginning of 2017. During his campaign, Trump
referred to the Iranian deal as a "disaster" and promised to "dismantle" the
agreement.
The U.S. election result was unexpected in Iran. "People in Iran and elsewhere
thought it would be a [Hillary] Clinton victory. She would have continued
Obama's policy of 'warming up' to Iran and a continuation of the JCPOA," says
Nicholas Masoud Gilani, chief investment officer at CommoditEdge, based in
Tehran, Iran and Dubai, U.A.E.
Gilani notes that Trump's win may have put a "wrench in the works," but it's
- 159 -

not a pullback "It's like coming to a stop sign and stopping the car until
there's more visibility, at least in the short-term. In the medium- and long­
range outlook, business in Iran will continue to expand, perhaps even more
under a Trump presidency," he predicts.
"The Iran deal is not just an agreement between the U.S. and Iran,"
Batmanghelidj points out. "The U.S. was the critical party in starting the
negotiations with Iran, but the deal relies on the buy-in of Russia, China,
France, Germany and the U.K. There are clear security and economic interests
for these other countries to keep this deal alive."
Nichols agrees. If Trump were to follow through on his campaign promises,
"the European nations are unlikely to join the United States in renewing
sanctions .... [Russian] President Vladimir Putin would likely veto any attempt
to renew sanctions through the Security Council. So it would just be the United
States. The United States could use its strength in the financial system to try to
prohibit banks anywhere from interacting with Iran, but the world is probably
getting a bit tired of that threat and has worked out ways around it."
Another question is whether Europe can take on a leadership role in
safeguarding the Iran deal. The deal was between Iran and Germany, France,
the United Kingdom, Russia, China and the U.S. The next wave of right-wing
populism is coming in Europe, along with Brexit and eurozone economic
issues, adds Batmanghelidj. These challenges could distract European leaders
from taking a strong stand in maintaining their agreement with Iran.
"Many people expected sanctions relief
to led to a gold rush, but it was always
going to take time to create momentum
in a complicated marketplace"
-Esfandyar Batmanghelidj
"Oddly, if Trump should choose to attempt to destroy the sanctions deal, his
best allies might the conservative element in Iran," Nichols notes.
- 160 -

"Conservative leaders in the religious establishment have suggested that if the
United States walks away from the agreement, then Iran will resume the
development of nuclear weapons. That might affect the positions of some
European nations."
'Huge' Potential
Iran is often viewed as an emerging economy with a huge amount of potential.
With a population of 80 million people a large proportion of which consists
of a growing middle class of consumers --it's a market that shouldn't be
ignored, especially by business-minded leaders, like Trump. "Iran's GDP is
bigger than South Africa's. It's the largest emerging market in the world and
the largest economic market outside the G20. I hope the economic issues will
take over political issues and act as a bridge," says Gilani.
According to a report from the McKinsey Global Institute, Iran could increase
its GDP by $1 trillion and create nine million jobs by 2035. It was the 18!
largest economy in the world in 2014. Iran has the largest gas reserve and the
fourth- largest oil reserve in the world. Moreover, Iran's economy is highly
diversified, since oil and gas account for just 23% of gross value added. Copper
and zinc reserves are significant. Real estate and construction make up a
sizable proportion of the economy. Gilani points out that Iran has the largest
automotive sector in North Africa and Western Asia, and European automotive
companies are taking notice. In 2014, Iran produced more than a million
vehicles.
However, there are still major challenges confronting those hoping to do
business there, Nichols points out. "One difficulty that some firms,
particularly small- and medium-sized firms, have faced is financing.
Arguably, the [U.S.] Office of Foreign Asset Control must still issue licenses and
permissions for banks chartered in the United States to work with Iranian
banks, and U.S. banks have been reluctant to seek those permissions or
attempt to create those relationships, so financing transactions remains
difficult."
Another stumbling block is that "Iranian banks need to go through substantial
- 161 -

reforms to meet international standards for regulatory compliance and risk
management," adds Batmanghelidj, who says that this process is now
underway. What's more, Gilani points out, Iranian banks are in a "state of
dysfunction saddled with nonperforming loans and inadequate capital in
accordance with the Basel [Accords]," a set of international standards
recommended to regulate the banking sector.
"Business in I ran will continue to
expand, perhaps even more under a
Trump presidency."
-Nicholas Masoud Gilani
Despite these challenges, the high-profile deals that have been inked over the
course of the year are creating some momentum. Boeing's deal, which was
approved by the U.S. government in September, also allows the company to
lease 29 new Boeing 737 to Iran Air. Batmanghelidj says the leasing program
is one way that American companies are finding solutions for financing, since
sanctions still prohibit U.S. dollars from being used in transactions. "In the
scheme of things, it may look like small steps, but it indicates that these large
companies are committed to finding creative pathways to trade in Iran.
Expectations around the Airbus and Boeing deals are high because they are test
cases for how companies should manage the litany of regulatory and financial
challenges" in doing business with Iran, he says.
Another indication that American companies are making inroads is that AT&T
is providing voice and data service to American cell phones in Iran, according
to The New York Times. In a partnership with RighTel, owned by the Social
Security Organization of Iran, which is a state entity with holdings in several
Iranian banks, AT&T's American customers can now make and receive phone
calls in Iran.
Moreover, technology ventures are starting to take shape. Pomegranate
Investment, based in Sweden, has committed to 60 million euros in direct
investment in consumer technology start-ups. "Institutional investment has
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been limited, but the fact there has been significant private capital invested is
encouraging," says Batmanghelidj. "Consumer technologies are a particularly
attractive sector given Iran's youthful demographics and high adoption rates
of mobile and digital products. The Iranian president has Twitter and
Instagram accounts."
Iran is the "most secular and pro-American country in the entire Islamic
world," adds Gilani. Trump is "not an ideologue. He's going to do the math,"
and he won't want to ignore the significant population size in Iran with its
huge market potential.
Regardless, Iran has weighty issues to battle on its path to economic recovery.
"The two greatest challenges are first the fact that the United States continues
to impose numerous other sanctions on Iran, and second, the fact that Iran's
economy continues to be dominated by the government or its cronies," says
Nichols.
All materials copyright of the Wharton School /http· /twww wharton.upenn.edu/) of the
University of Pennsylvania (http://www.upenn.edu/).

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Annex 137
M. Schwartz, K. Reddy and Dr. R. Ghorashi, “The Effects of the JCPOA on the
Iranian Economy”, American Iranian Council, 17 April 2017

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The Effects of the JCPOA on the Iranian Economy
The Effects of the JCPOA on the Iranian
Economy
April 17, 2017
Michael Schwartz, AIC Research Associate,
Kriyana Reddy, AJC Research Associate,
Dr. Reza Ghorashi, Professor of Economics at Stockton University & AIC
Publications Review Committee Member
Introduction
Over one year has passed since the formal implementation of the Joint
Comprehensive Plan of Action (JCPOA), signed by the US and P5+1 members (China,
France, Germany, Russia, and the UK), which lifted certain "nuclear-related
secondary sanctions," on various Iranian business sectors.[1] All parties to the JCPOA
agreed to implementing it "in good faith and in a constructive atmosphere" and to
"refrain from any policy specifically intended to ... affect the normalization of trade
and economic relations with Iran. "Iii While initially the JCPOA was met with
optimism, critics in both Tehran and Washington have challenged the effectiveness
and potential benefits of the agreement. Iranian public opinion remains steadfastly
in support of the deal, but the reality of Iran's long transition from economic isolation
has curbed some enthusiasm. While the JCPOA has created significant opportunities
for economic growth and normalization, the Iranian public has not yet seen many
tangible economic benefits.
Economic Effects of the JCPOA
In the six-month period following the agreement to implement the JCPOA, Iran
gained access to $4.2 billion in assets and increased export earnings by over $7
billion. The country is projected to recover to over S100 billion in formerly frozen
monetary assets overseas.[3] In addition to unfrozen assets, gross total relief to Iran
as a result of the deal is calculated to be roughly Sn billion, significantly higher than
original estimates by the US government.[4]
The benefits that Iran received from the deal are spread out over the multiple sectors
impacted by the JCPOA; however, the largest beneficiary of Iran's relief is the energy
sector. In the period following the agreement to implement the JCPOA, oil exports
rose by "about 400,000 barrels per day...earning Iran approximately $5 billion in
additional revenues over six months. "[5] Despite a global supply glut hurting crude
prices production and prices, oil and natural gas revenues were expected to reach $41
billion for the fiscal year ending March, 2017.[6]
Foreign investment is another area where Iran is also expected to see gains. New FDI
projects went from three in 2o13 to eight in 2o14, and nine in 2o15, but in the first
quarter 0f 2016, there were 22, with South Korea and Germany contributing the
most, at a total of$2.15 billion committed.[7] On January 15th, 2017, the Iranian
parliament agreed to a five-year economic development plan, which allows the
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The Effects of the JCPOA on the Iranian Economy
government to add an annual average of s30 billion in foreign financing, in addition
to S15 billion in yearly direct investment, and up to $20 billion in FDI from local
partners. This inflow of capital greatly surpasses the average high of $4 billion of
annual FD! during the sanctions period.[8] In addition, Iran has bought a 2.8
percent share in China's Asian Infrastructure Investment Bank (AIIB), which
promotes Asian FDI projects.[9]
In 2016, Iran had a GDP of $393.7 billion, which is expected to rise in 2017 by 5.2%
according to the World Bank, largely due to increased oil production revenues and
FDI projects.[10] While Rouhani's chief of staff, Mohammad Nahavandian, has
claimed "8 percent [GDP growth] is feasible," Emirates NBD senior economist Jean­
Paul Pigat asserted it is unlikely Iran will reach this optimistic mark.[11] While the
magnitude of long-term changes in oil prices remains uncertain, overall growth in the
Iranian economy is probable over the coming years. The economy shows great
potential and momentum-a population of 80 million people, a growing middle class,
and a dynamism that makes it the "largest emerging market in the world and the
largest economic market outside the G20." Should sanctions relief remain intact,
McKinsey Global Institute estimates that Iran "could increase its GDP by $1 trillion
and create nine million jobs by 2035.L12]
The effects of the JCPOA on Iran's economy are diverse, varying across numerous
sectors. The following is a breakdown of some of those effects by industry.
Finance and Banking
Despite the opportunities from the JCPOA, Iran's financial system continues to face
fundamental economic challenges. Problems include corruption, weak central bank
liquidity, non-performing loans, a lack of modern banking practices, and Iranian
security monitoring the sector. According to the World Bank, Iran ranks 118th in the
organization's index on the ease of doing business.[13] One senior Tehran banker
notes the economic isolation's negative effects: "Our banking system, like our
economy has been isolated and has no idea what has happened in the world over the
past decades." These factors might cause western banks to limit their activity within
the country if reforms are not pursued. Mortez Bina, a senior risk manager at the
Middle East Bank, warns about the risks of not pursuing reforms: "Foreign investors
will not come easily. If we don't make reforms, we will be in the same situation in five
years' time .... We are behind... if we had observed international standards, our
banking crisis would had been less severe. "[14] To face these challenges, Veliollah
Seif, Iran's central bank governor, has proposed Iranian banks need to be
reintegrated with foreign banks in the global economy and international standards
for financial regulation and compliance must be met.[15]
Many European and American foreign banks are not investing in Iran because they
fear fines from the US Justice Department for violating the remaining US sanctions,
which prohibit any foreign deals with the IRGC and restrict Iranian use of US dollars.
Due to the opaque Iranian economy, companies fear accidental connections to the
IRGC and the large fines this would entail. As one senior European official noted,
"There is going to be this large grey area that will scare European banks." Further
risks stem from the possibility that the Trump Administration could "tear up" the
JCPOA, reinstate the comprehensive sanctions, and take punitive measures against
any corporations connected to Iran.[16]
Despite the difficulties of reintegrating the Iranian banking industry, some foreign
banks willing to risk investment in the country have opened or are in the process of
2
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The Effects of the JCPOA on the Iranian Economy
opening new offices in Iran. In June 2016, Iran's central bank claimed: "Two
hundred small and medium-sized international banks have started correspondent
relationships with Iranian banks. "[I7] For example, Germany's Europaeisch­
Iranische Handelsbank AG (EIH), Italy's Mediobanca and Banca Popolare di Sondrio,
Oman's Muscat SAOG, India's UCO Bank Ltd., and South Korea's Woori Bank already
have or are planning to establish operations in Iran. The major European and
American financial institutions, however, have kept out of the country, largely due to
primary sanctions that remain in effect.[18]
In March 2012, all 30 Iranian banks were disconnected from SWIFT (the Society for
Worldwide Interbank Financial Telecommunications), which is used globally to
transfer capital across international borders. This effectively severed Iran's ties to the
global financial system. Following the implementation of the JCPOA, Iranian banks
are now allowed to re-engage with the SWIFT network, although concerns over doing
business in Iran continue to limit foreign transactions.
Since JCPOA implementation, Iranian financial authorities have been planning to
end the dual-exchange rate system and have taken important steps in that direction.
Prior to the lifting of sanctions, there was a large gap between the rates set by the
Iranian Central bank and the global market, which peaked in early 2o13 when the
Iranian central bank set the Rial/USD exchange rate at about 11,000 but the open
market placed it at about 38,000. President Rouhani has done much to bridge this
gap since taking office late in 2013, and as of December 2016, the official rate was
approximately 30,000, while the market rate was about 35,000. This new single
exchange rate policy would eliminate the gap completely and allow "commercial
lenders to buy foreign currencies using rial rates set by the market rather than those
dictated by the central bank." It would remove another barrier to foreign direct
investment, further enabling the rebuilding of the Iranian economy and moving it
toward true participation in the global marketplace.[19]
For Iran, improving its banking industry is essential to maximize the potential of the
JCPOA and meet its 2025 vision. While ILIA's report on the Iranian banking
industry admits the remaining US sanctions will limit short-term growth, the first
milestone to normalization and integration into the world economy has been
achieved.[20] More foreign transactions and investments can be expected in the
coming years, but progress will be gradual.
Insurance
Overall, sanctions relief is expected to boost the Iranian insurance market in 2017.
For insurance companies, Iran is an enticing emerging market. Axco Insurance
Information Services reports that Iran is the largest non-life insurance market in the
MENA region, as well as the 29th largest globally. Tim Yeates, managing director of
Axco, asserts, "Despite all the challenges Iran has faced over the past few decades,
Iran offers huge opportunities, which we see only growing as there is more foreign
investment; however, it's important to understand the risks and challenges that the
Iranian market offers. "1li] Repealing the 2012 ban, insurers and reinsurers are also
now allowed to cover Iranian oil companies, cargo, ships, and port authorities.[22]
Although US sanctions continue to restrict parts of Iran's insurance sector, there is
more opportunity for exchange between Iranian firms and foreign partners than
previously.[23] For instance, EU insurers and reinsurers remain interested in
pursuing business in Iran. As of November 2016, CEO of Lloyds, Inga Beale, met with
Abdolnaser Hemmati, president of the Central Insurance of Iran, over potentially
expanding into Iran.[24] Likewise, Mehr News reported in March 2017 Victor
3
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The Effects of the JCPOA on the Iranian Economy
Peignet, CEO of France's SCOR Global P&C met with Hemmati to discuss increasing
insurance ties. After the meeting, Hemmati stated: "We hope that insurance relations
between the two countries will be expanded within framework of the Joint
Comprehensive Plan of Action (JCPOA) and removal of restrictive conditions rooted
in unresolved sanctions against some Iranian companies."[25] Additionally, in 2016,
one US insurer received special authorization to cover Iranian oil cargos.[26] There is
still, however, concern regarding investments that could potentially facilitate
terrorism. Most US banks are reluctant to make loans for business ventures in Iran
due to the penalties outlined in the JCPOA for engagement in activities that might aid
terrorism.[27] While US and EU insurers and reinsurers will gradually enter the
emerging market, their Asian counterparts will likely march ahead-while still
limiting risk-to capture the market. In the future, investors and insurers can expect
the opening of Iran's insurance space to be slow; nevertheless, significant progress
has been made since the implementation of the JCPOA.
Energy and Petrochemical
In the Iranian energy sector, the JCPOA was met with expectations of a revival of
Iranian petrochemical production and exports, which had been severely constrained
by sanctions that limited Iran's export markets, excluded Iran from the global
financial system, prevented new American and EU investments, and forced European
International Oil Companies' (IOC) to leave the country. The JCPOA states the US
has formally ceased "efforts to reduce Iran's crude oil sales, including limitations on
the quantities of Iranian crude sold, the jurisdictions that can purchase Iranian crude
oil, and how Iranian oil revenues can be used. [28] Therefore, non-US persons are
now allowed to purchase, sell, transport, and acquire Iranian oil if the transactions
"do not involve persons on the SDN List. [29] These transactions, however, must be
executed without using the US financial system.
In the year since the implementation of the JCPOA, the Iranian government has
increased crude oil production to 3.9 million barrels per day (b/d), an increase of
roughly a million b/d from production during the sanctions years.[3o] Iranian Energy
Minister Bijan Zanganeh stated that Iran was close to its target of 4 million b/d,
which the country had produced prior to the 2o12 nuclear sanctions. While the
November 2016 OPEC deal allowed Iran to return to pre-sanctions output, Iran's
increase is slightly more than its agreed upon production cap (3.8 b/d).[31] By
allowing Iran to return to its pre-sanctions output levels, OPEC implicitly confirmed
Iran's claim that its lower production during sanctions was an "unjust" anomaly. This
lets Iran continue to produce, while OPEC nations and other parties to the agreement
such as Russia are required to cut production.
In conjunction with increased production, Iran's oil exports are also expected to
climb. While Iran has had difficulty finding buyers for its oil in the global supply glut,
crude and condensate exports for February 2o17 are expected to reach 2.20 million
b/d, a modest increase from 2.16 in January. In Asia, Iran's exports have hit a three­
month high of 1.5 million b/d, while in Europe the total remains stagnant at roughly
600,000 b/d. Ralph Leszcynski claims that Europe's imports of Iranian crude have a
history of being higher: "Italy and Spain used to be quite enthusiastic buyers of
Iranian crude ... In 2011 they were accounting for respectively 7 and 6 percent of
Iranian oil exports."[32]
The severe international sanctions levied against Iran made its energy industry in dire
need of international investment. Zaganeh claims the industry needs the investment
of $100 billion or more to reach its production goals. Due to the JCPOA, throughout
4
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The Effects of the JCPOA on the Iranian Economy
2016 a large number of both Eastern and Western IOCs signed memorandums of
understanding to develop Iran's extensive energy reserves. These companies include
American-Dutch Schlumberger, British-Dutch Shell, Chinese CNPC, French Total,
German Wintershall, Italian Saipem, Japanese Inpex, Norwegian ONO, and Russian
Gazprom. While only Total, NIOC, and CNPC have pursued contract finalization,
many of the aforementioned IOCs are preparing to do so.[33] Since the
implementation of the JCPOA, Shell, however, has remained "cool" to Iranian oil,
purchasing only three cargos of crude, a small fraction of what it used to buy, because
of the legal challenges and risks of large-scale transactions.[34] Without
international investment and the technology it brings, Iran will continue to hold some
of the largest oil and natural gas reserves (13% of the global total) but fail to increase
its production, which only accounts of 4.7% of the worldwide total.
While increasing crude oil production, Iran will also seek to take more advantage of
its massive natural gas reserves, valued at $7 trillion, despite the country's current
low exports. Iran holds one of the largest gas fields in the world, the South Pars,
which is currently being developed by Iran's Petropars and China's CNPC. In early
January 2017, South Pars was producing 5oo cu m/d, a substantial increase from the
285 cu m/d in January 2o13. Iran expects to add 45 million cu m/d by the end of
March.[35] IOCs have recognized the potential for investment in Iran's growing
natural gas industry. Austria's OMV AG has said that the natural gas market in Iran,
is "a big opportunity." Others remain more bearish: Christopher Haines, head of
BMI's oil and gas division, argues "Iran's got just a huge amount of potential, but I
don't see anything major happening for some time. [36] In addition, Total is in
negotiations to buy a stake in and help complete Iran's partly built LNG export
facility, essential to exploiting its vast reserves. While this deal faces significant
hurdles, gaining an LNG plant would modernize Iran's natural gas infrastructure.
While sanctions relief has increased Iranian petrochemical production and sales, Iran
will need to attract capital and technology to strengthen its oil and natural gas
infrastructure in order to meet its long-term goals.
Shipping, Shipbuilding, and Port Sectors
The JCPOA has rescinded the restrictions on Iran's shipping industry that sought to
isolate the country from the global economy. The sanctions against Islamic Republic
of Iran Shipping Line (IRISL) caused 85% of Iran's exports and imports to be
disrupted and caused insurance companies and international classification societies,
which provide technical certificates for ships to travel in international waters, to sever
their relationships with IRISL.[3Z] Rouhani notes the disastrous effects that the
sanctions had on shipping: "Formerly, we were under sanctions with respect to
shipping areas, leading to a situation in which large vessels did not call at Iranian
ports and thus we were inevitably forced to ship the respective goods to our ports by
dhows, which imposed enormous expenses on Iran. "[38]
Since the JCPOA, IRISL has sought to revive its previous services and routes. Only
twenty days after the implementation of the JCPOA, IRISL revived its Persian Gulf­
Europe line. Shortly thereafter, the Azargoun carried thousands of standard shipping
containers to Hamburg, marking a resumption of trade after nearly six years.[39]
Likewise, the Shipping Corp. of India seeks to revive its shipping lines with Iran to
access Central Asian and Middle Eastern markets.[40] In January 2o17, Zaganeh
announced two Iranian VLCCs were headed to Rotterdam for the first time in five
years to export 4 million barrels of crude. In addition, IRISL has sent representatives
to ports around the world and attained a $580-million insurance policy on its fleet.
5
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The Effects of the JCPOA on the Iranian Economy
To further restore and expand its shipping industry, Iran has also sought to
modernize its fleet. In 2016, Hyundai Heavy Industries Co. signed a $700-million
deal with Iran to provide 1o ships for Iran's state-owned shipping company.[41] The
deal constitutes one element of IRISL's plan to spend nearly $2.5 billion for
modernization. Hyundai stated that the deal marks Iran's first ship order since
international sanctions were lifted in early 2016.[42] Likewise, China's Dalian
Shipbuilding Industry Co. is in negotiations with IRISL for the construction and
modernization of oil tankers and container ships. The cost of this project is estimated
at $8-12 billion and is expected to be completed by 2022.[43]
Iran has increasingly pursued investment in the development of ports on the Indian
Ocean to expand its maritime trade routes. In the late 1990s Chinese firms backed
the development of the Gwadar Port, in Baluchistan, Pakistan, near the Iranian
border. In 2002, in response to China's development of the Gwadar Port, India began
developing Iran's Chabahar deep-water port, a key Persian Gulf port.Lbl]
Development for this port, however, has been slow, with difficult negotiations and US
sanctions causing India to cease development until 2o12, and Chinese officials
seeking to invest to undermine India. Although China may have been interested in
obtaining the contract for construction of this port to increase its presence in the
Persian Gulf, after the JCPOA agreement, India and Iransigned an MOU for the
project's completion.[45] India wants to use the Chabahar Port to export its products
to Iran and Central Asian countries north of it. While China will unlikely be able to
control a large portion of the development of the Chabahar Port, in 2015, CEPC
announced its s2.5 billion plan to develop an oil pipeline from Gwadar to Nawabshah
Iran, connecting China's port in the region to Iran.Llfil
On the one hand, the Iranian shipping industry will depend on major increases in
marketing, construction, and investment to maintain long-term growth. On the other
hand, the industry has already seen some success following the JCPOA--the Hyundai
Heavy Industries deal, growing shipbuilding interest from China, development of
ports, and increased trade with Asia and Africa.[47]
Precious and Non-Precious Metals
Since the implementation of the JCPOA, non-US persons are authorized to buy, sell,
and transfer precious and non-precious metals to and from Iran, including silver,
gold, base metals, platinum, iridium, osmium, palladium, rhodium, ruthenium, and
waste/scrap of precious metal or metal clad with precious metals.[48] With 68 types
of metals and minerals amounting to roughly 43 billion metric tons of reserves
untapped, sanctions relief will allow Iran to attract investment from foreign
companies. The investment space for major global firms is large, but a slump in
global metals prices and the challenges of navigating political risk in Iran will slow
the entry of mining firms in the Iranian market. Neil Passmore, chief executive of
Hannam & Partners, notes the challenges of investment: "Iran absolutely has world­
class mining assets, which have hitherto been shrouded from investors, but we're in
the depths of one of the darkest, worst downturns in mining for some time. "Ll9}
Nevertheless, Iran has been trying to lure investors to develop its mining industry. In
October, the Indian national aluminium company, NALCO, stated it plans to send an
exploration team to Iran to potentially develop a $2 billion smelter, but is also
considering projects in Qatar and Oman instead.[5o] Likewise, Singapore-based
metals trader Trafigura Group Ltd., which re-entered Iranian markets after the
implementation of the JCPOA, announced its search for a Persian-speaking executive
to oversee business opportunities in the Middle East.Isil While these developments
6
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The Effects of the JCPOA on the Iranian Economy
are essential to expanding and restoring the Iranian mining industry, there is still a
long way to go before Iran can truly take advantage of its metals and minerals
resources. In November 2016, state-owned mining company IMIDRO told an
Australian mining conference that Iran's sector needed s2o billion in investment by
2025.[52]
The short-term results of the JCPOA did not prove promising, with declining metals
prices and foreign investors' wariness about working with the Iranian government
thwarting major deals.[53] In the medium term, however, prospects for Iran's mining
sector look brighter. For instance, Iran's demand for copper is expected to grow by
about 3 to 4 percent per year, and Iran has some of the world's largest undeveloped
copper and zinc deposits. [54] Pursuing the development of its commodities industry
beyond oil is essential for Iran to diversify its economy. As Robin Bhar, head of
metals research at Societe Generale notes, "As [Iran] get more oil revenue, there's no
reason why they shouldn't look to diversify the economy and drive metals exports." In
the long term, Iran's resources and low energy costs will help it become a bigger
player in the global metals industry.[55]
Automotive Sector
The JCPOA has enabled non-US persons to sell goods and services used in the
automotive sector to Iran. Excluded from this element of the JCPOA are US-origin
finished vehicles and auto parts, which still cannot be exported to lran.[sfil
Iran's automotive industry is its second largest (following oil and natural gas) and
accounts for nearly 10% of the nation's GDP and 4% of the labour force. During
sanctions, and particularly the last two years before the JCPOA, the industry entered
a sharp decline; however, last year proved transformative for Iran's automotive
industry. From March 2o to December 2o, roughly 950,000 four-wheeled vehicles
were produced in Iran, a 39.1 percent growth in the number of domestically­
manufactured vehicles.[57] Additionally, numerous deals between foreign and
Iranian firms were successfully arranged. In January 2016, Peugeot-Citroen (PSA
Group) signed a €4oo-million deal with Iran Khodro, a subsidiary of the state-owned
Industrial Development and Renovation Organization.[58], L59] Iran Khodro also
announced an agreement with Datsun, a subsidiary of Nissan. In addition, Iran's
automotive market has gotten attention from Fiat and Lifan, both of whom are
considering the development of new vehicle models for the Iranian market.[60]
Because of all of these factors, Iran is set to reach its goal of producing 3 million cars
per year by 2025.[61] Until then, carmakers are projected to export some s6 billion in
car-related products and s25 billion in car parts.[62]
Nevertheless, investors continue to withhold their money from the automotive
industry. Iran must invest nearly € billion over the next year to keep the industry
alive, but sanctions relief has allowed foreign investments from global automotive
giants to cover some of the expected need for investment.[63]
Tourism
Iran's tourism industry generates approximately $8 billion annually, and is expected
to create over 1.9 million Iranian jobs by 2025.[64] After the United States lifted
sanctions in 2015, the number of tourists visiting Iran rapidly increased. The country
expects, by 2025, to attract a total of nearly 20 million tourists who will spend
approximately S30 billion.
7
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The Effects of the JCPOA on the Iranian Economy
The tourism industry appears to be growing, but most foreign public opinion remains
stagnant. Polls indicate that a mere 14 percent of Americans hold a favorable view of
Iran-the same as prior to the nuclear deal.[65] In contrast, the perception in Iran of
tourists is much different. In June 2016, a survey by the Center for International
Security Studies at Maryland claims 80.1% of Iranians support American tourism to
some degree. [66] Many Iranians have welcoming attitudes that also extend to
sharing homes. In the past few years, roughly 36,000 Iranians have offered free
lodging to tourists as a means of creating positive experiences for them and
exchanging cultural knowledge.[67] The Iranian government is also pushing for an
expansion of the tourism industry. Last summer, it authorized the eligibility of
citizens of 190 countries to receive 30-day visas.[68]
This government effort will also benefit the hotel and hospitality sector of the tourism
industry. With a shortage of hotels, and many in need of renovation, 125 new four­
and five-star hotels are currently under construction. Foreign investors have
contributed to this construction boom, including Europe's largest hotel group, Accor,
and UAE-based Rotana. In addition, German-based InterCity Hotels Group recently
reached an agreement with the Iranian government to build 10 new luxury hotels
over the next decade.[69]
Public Opinion
In June 2016, a year after the unveiling of the JCPOA, the Centre for International
Security Studies at Maryland created a survey of over 1000 Iranians on the perceived
effects of the agreement. [7o]
Q16 shows a general trend moving from strong enthusiasm for the JCPOA to
continuing but less ardent support. In contrast, disapproval of the JCPOA remains
relatively static, but with small increases.
The waning enthusiasm for the JCPOA as a whole is reflected in Q5a and Q5b, which
indicate a growing sentiment that the economic conditions in Iran have not been
improving, and have instead been getting worse or remaining the same. Among
participants that claimed Iran's economy is stagnant or declining, the majority do not
blame President Rouhani, but see the causes as outside of his control.
On the topic of living conditions, most Iranians believe they have not improved, but
66% are somewhat optimistic they will in the future.
Regarding foreign investment, most Iranians believed initially after implementation
that it would take six months to a year to notice tangible effects. By June 2016, while
there was little consensus about the time it will take, most Iranians were less
optimistic than they were previously. The general trend and opinion is that whatever
positive effects do result, they will probably come later and perhaps be less significant
than originally thought.
On unemployment, there is a similar widespread opinion trend that positive change
will come later and perhaps be less significant than first expected.
While the majority of Iranians continue to support the JCPOA and believe that there
will be some positive results from it, their initial enthusiasm has been tempered by
reality. Iranians are learning that while the JCPOA can foster long-term economic
growth, the agreement is not a panacea for all of the nation's economic ills. They see
that the agreement is a first step in a large, complex process of addressing Iran's
8
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The Effects of the JCPOA on the Iranian Economy
economic isolation and lack of modern financial policy and physical infrastructure.
Conclusion
Although the JCPOA has shown some promising initial results, the future of it rests in
a delicate balance. The "snap back" provision of the JCPOA, which allows the US to
re-impose sanctions should Iran engage in any transgressions, adds a tentative
element to the agreement.[71] The implications of the snap back are far-reaching;
they go well beyond the Iranian economy. If the US suspects Iran of violating the
JCPOA, the US may present its allegation to the UN Security Council, after which
sanctions would be automatically re-imposed, unless protested by the majority of the
members of the UNSC. In this case, a whole new resolution would have to be passed
in order for the snap back sanctions to be nullified.[72] Additionally, the US
legislature recently passed the Iran Sanctions Extensions Act, giving the US
government the authority to re-impose sanctions under the original Iran Sanctions
Act of 1996 at any point during the 1o-year period between December 31, 2016, and
December 31, 2026.[73] It is uncertain whether more sanctions will be lifted by the
US government in the foreseeable future.
Despite this uncertainty, the success of major US-based companies in securing
business deals in Iran proves that the JCPOA has enabled great changes within the
Iranian-American economic relationship. Boeing recently closed a $25-billion deal
with Iran Air for civilian aircraft and parts. [74] General Electric applied for OFAC
authorization to provide maintenance and sell equipment to Iranian customers.[75]
In addition, several smaller firms have utilized General License H to enter into new
business agreements with Iran. Despite some lingering cultural and religious
wariness, many major global corporations are expanding their field operations,
investments, and supply chains in Iranian markets-indicating a growth in investor
interest. Nevertheless, the impacts of both US and Iranian politics and instability in
the Middle East will be continuing factors influencing foreign investment in Iran.
The JCPOA has had a diverse impact on the Iranian economy, but the economy
continues to face ills that could not-and cannot-be solved by sanctions relief alone.
For example, unemployment rates in Iran have reached record highs despite the new
economic opportunities.[76] Since January 2016, unemployment in Iran has
increased from 10.7 t0 12.2%.[77] Additionally, many Iranian assets remain frozen by
US banks, and while Iranian exports to the US increased, American exports to Iran
decreased in 2016, signalling hesitance by many Western companies to expand
business activity in Iran. Iran will also face political uncertainty in the coming years­
with the upcoming 2o17 Iranian elections, President Hassan Rouhani's economic
reforms for an open economy face staunch opposition from Iranian conservatives.
Another major factor impeding the recovery of the Iranian economy is the continuing
domination of key industries by Khamenei and his conservative network of
supporters. Khamenei-controlled corporations have been receiving the majority of
deals: Forbes reported that as of February 2o17, private Iranian companies got only
17, while companies with heads appointed by Khamenei got 90. Corporations
controlled by Khamenei, including the Army of the Guardians of the Islamic
Revolution (IRGC)-a branch of Iran's Armed Forces-have finalized foreign deals
estimated at over S11 billion. Of the 9o deals, the IRGC has large stakes in four
through front companies, despite the continuing US sanctions on business
connections with the IRGC. Companies that made three of these four deals have yet
to be sanctioned, while the fourth still is involved indirectly.[78] Within the key oil
and natural gas sector, the IRGC and other forces in the Iranian military-industrial
9
- 175 -

The Effects of the JCPOA on the Iranian Economy
complex continue to hold a strong presence. IRGC members have not only been
placed in key positions (e.g., post of oil minister) but also acquired major contracts in
offshore energy services.[79] International firms view Iran as a risky investment
space, and the inseparability of Iran's theocratic politics from its national economy
will determine the extent to which the JCPOA can create more positive change in the
coming years.
The JCPOA has opened business and trade opportunities in numerous Iranian
economic sectors, and these changes have already led to significant growth in the
Iranian economy. Promoting open economic relations, as well as retaining the
sanctions relief programs offered by the JCPOA, will likely lead to greater economic
growth--and political stability--in Iran in the coming years. While the JCPOA offers
an opportunity for improvements, sustainable economic growth is a long-term
process. The JCPOA is a step in the right direction; however, there are no quick fixes;
genuine economic growth will be a process of evolution, not revolution.
[I] JCPOA Implementation," U.S. Treasury(16 January 2016) p. 2
[2] "Joint Comprehensive Plan of Action" (Vienna: 14 July 2015) p.14
L3] Kasra Naji, "Iran Nuclear Deal: Five effects of lifting sanctions," BBC (18 January
2016)
[A] Steven Mufson, "What ending sanctions on Iran will mean for the country's
economy (12 August 2015)
[s] Ibid.
[6] Tsvetana Paraskova, "Iran's Oil, Gas revenues to hit $41B in 2016/2017 Oilprice
(16 January 2017)
L7] Cara Lyttle, "FDI in Iran soars with sanctions relief," Financial Times, (20 June
2016)
[8] Andrew Torchia and Tom Heneghan, "Iran Parliament stresses foreign
investment in five-year economic plan," Reuters (15 January 2017)
[9] Ben Blanchard, "China says Iran joins AIIB as founder member" Reuters (8 April
2015)
[Io] "Islamic Republic of Iran" International Monetary Fund, IMF Country Report
17:62 (February 2017) p. 4
[1] Jean-Paul Pigat, "Iran FDI Update" Emirates NBD (8 February 2016)
12] "Iran without Sanctions: What has changed?" Knowledge at Wharton, (13
December 2016)
[13] Richard Nephew and Elizabeth Rosenberg, "Iran's broken financial system"
Politico, 6 August 2016
WI] Najmeh Bozorgmehr, "Iran's 'outdated' banks hamper efforts to rejoin global
economy Financial Times (19 January 2016)
LI5Ibid
I0
- 176 -

The Effects of the JCPOA on the Iranian Economy
[16] Geoff Dyer, Martin Arnold, Alex Barker, "Sanctions confusion leaves European
banks wary of Iran business" Financial Times (17 January 2016)
LI7] Thomas Arnold and Bozorgmehr Sharafedin, "Small banks help Iran slowly
restore foreign financial ties" Reuters, (15 June 2016)
[18] Golnar Motevalli and Mathew Martin, "Foreign Banks Open in Iran, Central
Bank Official Says" Bloomberg (6 November 2016)
L19] Ladane Nasseri, "Iran Puts Trust in Market to Deliver Currency Boost to
Recovery" Bloomberg (2o August 2016)
[2o] Ibid
[21] Louie Bacani, "Lloyd's in talks with Iran for expansion" Insurance Business
Magazine (21 November 2016)
[22] Jonathan Moss and Jamie Barton, "An update on the lifting of sanctions against
Iran" DWF (18 March 2016)
[23] "Iran Insurance Report" BMI Research
[24] Bacani, "Lloyd's in talks with Iran for expansion"
L25] "Scor eager to boost insurance ties with Iran" Mehr News Agency (5 March 2017)
[26] Moss and Barton, "An update on the lifting of sanctions against Iran"
[27] Ibid.
[28] "Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions
Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day" U.S
Treasury Department, p. 9.
[29] Ibid p. 10.
L30] David Jalilvand, "Iranian Energy: a comeback with hurdles" The Oxford
Institute for Energy Studies (Jauary 2017)
L31] Tasmin Carlisle, "Iran lifts crude oil output to 3.9b/d, supporting rising exports"
S&P Platts (27 January 2017)
L32] Osamu Tsukimori and Aaron Sheldrick, "Iran's oil exports to rise slightly in
February Reuters, (27 January 2017)
[33] Jalilvand, "Iranian Energy: a comeback with hurdles"
L34] Dmitry Zhdannikov, "Despite sanctions relief, Shell still cool on Iranian oil
buys" Reuters (10 March 2017)
[35] Carlisle, "Iran lifts crude oil output to 3.9b/d,"
[36] Weixin Zha and Kelly Gilblom, "Money talks louder than Trump for Iran in
Natural Gas push" Bloomberg (23 February 2017)
II
- 177 -

The Effects of the JCPOA on the Iranian Economy
[37] "IRISL to Experience a Boom" IRISL Group (12 March 2017)
13fil "Facilitation of Shipping Activities, Substantial Achievement of JCPOA," IRISL
Group (3 August 2016)
L39] In-So0 Nam, "Hyundai Heavy Gets 8700 Million Deal to Build 1o Ships for Iran
Shipping Lines" Wall Street Journal (10 December 2016)
[4o] Saket Sundria and Debijit Chakraborty, "Top India Shipping Line Reviving Iran
Venture to Fight Slump" Bloomberg (2 September 2016)
[A1] Nam, "Hyundai Heavy Gets $700 Million Deal"
[42] Ibid.
[43] Chen Aizhu and Bozorgmehr Sharafedin, "China firms push for multi-billion
dollar Iran rail and ship deals" Reuters (10 March 2016)
[44] Michael Tanchum, "Iran's Chabahar Port transforms its position" The Jerusalem
Post (January 4, 2014)
[45] Ibid.
[46] Joel Wuthnow, "Posing Problems without an Alliance: China-Iran Relations after
the Nuclear Deal"
[47] Ibid.
[4fil "Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions
Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day" U.S
Treasury Department, p. 22.
[49] Eric Onstad, "Iran offers mining riches post-sanctions, but investors cautious."
[so] Ibid
[51] Andy Hoffman, "Trafigura aims to boost metals trading with Post-Sanctions
Iran" Bloomberg (6 October 2016)
[52] Onstad, "Iran offers mining riches post-sanctions"
[53] Ibid.
L54] Hoffman, ''Trafigura aims to boost metals trading"
[55] Onstad, "Iran offers mining riches post-sanctions"
[56] "Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions
Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day" U.S
Treasury Department, p. 24.
[57] "Iran's Auto Production Jumps by about 40% in 9 Months" Tasmin News
Agency (16 December 2016)
[58] Iran Auto Sector 2016: Playing for High Stakes" Financial Tribune (1 January
12
- 178 -

The Effects of the JCPOA on the Iranian Economy
2017)
L59] Kenith Ashtarian, "Iran's Automatic Industry: A potential draw for investors"
UNESCO Report (27 January 2016)
[60] Tbid.
[61] "Nuke deal appears to help Iran's car making industry Azer News (23 December
2016)
[62] Ibid.
[63] 1bid.
[64] Iran Tourism: After the Nuclear Deal" SURF Iran (14 July 2016)
[65] Andrew Dugan, "After Nuclear Deal, US Views of Iran Remain Dismal" Gallup
(17 February 2016)
[66] Ebrahim Mohseni, Nancy Gallagher, Clay Ramsay, "Iranian Public Opinion One
Year after the Nuclear Deal: A Public Opinion Study" The Center for International
and Security Studies at Maryland (July 2016)
[67] Thomas Erdbrik, "Long Avoided by Tourists, Iran is Suddenly a Hot Destination"
The New York Times (8 November 2016)
[68] Behdad Mahichi, "Tourism on the rebound in Iran" Al Jazeera (29 July2016)
[69] Erdbrik, "Long Avoided by Tourists, Iran is Suddenly a Hot Destination"
L70] Mohseni, Gallagher, Ramsay, "Iranian Public Opinion One Year after the
Nuclear Deal"
L72] Michele Kelemen, "A Look at How Sanctions Would Snap Back" If iran Violates
Nuke Deal" NPR (20 July 2015)
L73] Baker McKenzie, US- Iran Sanctions Act extended for ten years; OFAC updates
Iran FAQs and issues General License J-1" Lexicology (20 December 2016)
L74] Zachary Brez, "6 Months Since Iran Sanctions Relief Lessons and Forecast"
Law360 (28 July 2016)
L75] Ibid.
L76] Majid Rafizazdeh, "New empowered, Iran will take a bolder approach in the
region" The National(31 December 2016)
[:z:z1 "Iran Unemployment Rate" Trading Economics
[78] Heshmat Alavi, "Iran Irony: IRGC and State Firms are Benefiting from JCPOA"
Forbes (16 February 16, 2017)
[79] "In Iran, Economic Reforms Hit a Hard Line" Stratfor (3 April 2016)
13

- 179 -

- 180 -

Annex 138
N. Habibi, “The Iranian Economy Two Years after the Nuclear Agreement”, Middle
East Brief, February 2018, No. 115

- 181 -

- 182 -

Brandeis University
Crown Center
for Middle East Studies
Mail«top 010
Waltham, Maachuett
02454 9110
781-736-5320
781.736 5324 Fae
Brief
www.brandeis.edu/crown
Judith and Sidney Swartz Director
and Professor of Politics
hai Feldman
The Iranian Economy Two Years after the
Nuclear Agreement
lssociate Director
ristina Cherniahivsky
Charles (Corky) Goodman Professor
Nader Habibi
of Middle East History and
Associate Director for Research
Nagheh Sohrabi
Myra and Robert Kraft Professor
of Arab Politics
anuary 16, 2018, marked two years since the Joint
Comprehensive Plan of Action (JCPOA) the nuclear
Eva Bellin
J
Henry J. Leir Professor of the
Economics of the Middle East
Nader Habibi
Ren~e and Lester Crown Professor
of Modern Middle East Studies
Pascal Menoret
Senor Fellows
Abdel Monem Said Aly, PhD
Kanan Mak iya
Goldman Senior Fellow
Khalil Shikaki. PhD
Research Fellow
David Siddhartha Pate1. PhD
Neubauer Junior Research Fellow
Golnar Nik pour. PhD
agreement between the PS+ 1 ( the U.S , the UK, France,
China, Russia, and Germany) and Iran-went into effect,
and the international nuclear related sanctions on Iran began
to be lifted. From the adoption of the preceding interim
agreement in November 2013 until the final agreement on the
JCPOA, each phase in the process met with approval and at
times celebrations by Iranians, who expected their personal
economic welfare to improve considerably as a result of
the lifting of sanctions to which Iran had been subjected for
several years. Yet, in the final days of 2017, less than three
weeks before this second anniversary of the agreement,
Iranians protested in the streets of many cities against
continued economic hardships
Junior Research Fellows
Samuel Dolbee. PhD
This Brief explores the economic basis for the recent demonstrations in Iran
Nits Hagerdat. PhD
Mohammed Masbah. PhD
February 2018
No. 1I5
by addressing two questions. First, in the two years since the JCPOA lifted
nuclear -related sanctions, what have been the effects of the agreement on
Iran's economy as a whole? And second, as the protests suggest, why have so
many Iranians not felt the economic benefits of sanctions relief in their daily
lives? While Iran's oil exports have sharply increased since the nuclear deal,
continued US. unilateral sanctions, along with uncertainty caused by the
Trump administration's hostility to the deal, have hampered Iran's ability to
attract foreign investment and to reengage with the global economy. This has
limited the deal's economic dividends, particularly in terms of the ability of the
Iranian economy to create jobs for its growing population in provincial cities
- 183 -

and towns. The Brief concludes by assessing the economic impact of the nuclear
deal after two years
L
Macroeconomic Conditions and the Business Climate
Oil Sector
Up until the introduction of comprehensive sanctions in 2012, which for the
first time included restrictions on oil exports, the impact of sanctions on Iran's
economy was limited. But several indicators demonstrate the heavy cost for
Iran of sanctions between 2012 and 2015. The combined effect of the direct oil
embargo combined with financial sanctions caused a severe reduction in Iran's
daily crude oil exports. Average daily exports (including of condensates) fell
from 2.6 million barrels per day in 20l1 to I2 million barrels in 2013 and I+
million in 2014' Restrictions on Iran's oil exports continued until January 2016,
when the nuclear agreement went into effeet. Overall, oil production remained
depressed between 2012 and 2015 (Figure I). During 2012 and 2013, crude oil
prices exceeded S$IO0 per barrel, so the lost oil export revenue due to sanctions
was substantial.
Iran's first priority after the lifting of sanctions in January 2016 was to boost its
oil exports to pre-2012 levels and restore its share of OPEC production. During
2014 15, the one million barrels per day (mb/d) reduction in Iran's exports
was replaced on the international market by increased production in Iraq,
Saudi Arabia, and the UAE. As Iran increased its crude oil production after the
nuclear agreement, it asked these and other OPEC members to reduce their
excess production in order to preserve the cap on total OPEC production. Other
members ignored Iran's request, but Iran increased its oil output significantly in
2016. Average daily exports, which had declined from 2.4 mb/d in 20I1 to I mb/d
in 2013 under international oil sanctions, rose to I4 mb/d by February 2014 under
sanctions relief, and increased to 2.2 mb/d in August 2017
Figure 1. Crude Oil Price and Production Data for Iran
uo --------------------------�
Nader Habibi is the Henry
]. Leir Professor of the
Economics of the Middle
East at the Crown Center,
Brandeis University.
o<:.
)(_
--\--------4»
,0-----------------------------j
The opinions and fundings expressed
o----�------�------�------��
2006
2007
2008
2009
20Io
20II
20I
2013
2014
2015
in this Brief belong to the author
20i6
2017
Price of Crude Oil ($ per barrel left axis) Production (mullion barrels per day nght aus)
exclusively and do not reflect those of the
Source of data: Statista (price), www.eia.gov (production)
Crown Center or Brandeis University.
2
- 184 -

The production data for the period January 2016 to August
20l7 point to a robust growth in oil production. Daily
production increased from 3.3 mb/d in December 2015 (the
last month of the oil embargo) to 4.3 mb/d in January 2017
(up 30%). Production increased by an additional 3.7% in
the next seven months to 4.46 mb/d in August 20I7.' This
level exceeded the peak production
The sharp increase in Iran's crude oil exports and the
restoration of international trade links, which together
constituted the most immediate impaet of the lifting of
sanctions in January 2016, led to a high economic growth
rate in 2016. Most of this growth was due to utilization of
the oil sector's existing capacity (Figure 2). The growth
rate in the non -oil sectors of the economy, which are the
main sources of jobs and income for most Iranians, was a
meager 3.3% (which was, nevertheless, much better than
the -3.1%decline of 2015)
level before the oil
sanctions (414 mb/d in 2005) by 330,000 barrels per day.
Although Iran's higher level of exports in 2016 coincided
with lower oil prices, its oil and gas export revenues rose by
66%, from $33.56 billion in April 2015-March 2016 to $55.75
billion
in April 2016-March 2017' And since oil prices
Figure 2. Annual Economic Growth Rate
(percentage)
recovered further in 20l7 and Iran was also able to increase
its export levels, we expect that oil and gas export revenues
have enjoyed a positive growth in 20l7 as well
I
Iranian leaders have been eager to increase oil exports to
Europe and to expand other economic relationships, such
as investment and technology transfer, partly in order
to gain more diplomatic leverage vis-~-vis US. efforts to
impose new oil sanctions. Since the nuclear agreement,
these efforts have been successful In November 2017, 40%
of Iran's crude oil exports were sold to European countries
that had suspended all oil imports from Iran
i
in 2012.
2006
200?
200
2009
20IO
20L2
DOLL
201 20
2015
20I6
20L
ad Grothe
Al Growth Re 'lg oil eto
Source of data: Iran Central Bank
Between March and October 20l7, European countries
purchased an average of 720,000 barrels per day from Iran
Iran's largest oil customers in 20l7 were China and South
Korea, which imported 600,000 and 400,000 barrels per
day, respectively, in November.'
Economic Growth
International Trade and Investment
Iran received partial sanctions relief in November 201 in
exchange for accepting some restrictions on its nuclear
activities and participating in nuclear negotiations with the
P5+1. The partial relief period lasted until January 16, 2016,
when the nuclear agreement went into effect. The impact
of this relief is visible in Iran's higher economic growth rate
in 2014; but negative growth was recorded in 2015 (Figure
2). The economic decline of 2015, however, was not entirely
due to the pressure of economic sanctions; it was in part
also a result of the anti-inflationary policies of the Rouhani
administration.°
An examination of the volume of Iranian imports reveals
a gradual decline between 201l and 2013 (Table ); these
years coincided with record-high oil prices. Under normal
circumstances, high oil revenues would have encouraged a
sharp increase in imports, but economic sanctions had an
adverse effect. A combination of limited oil exports, lower
oil prices, and sanctions finally caught up with imports in
2015, when the value of imports declined to $52.4 billion.
Between July 2015, when the JCPOA agreement was
signed, and the January 16, 2016, date of implementation,
Iran engaged in a major campaign to encourage foreign
Table L Iran's External Trade (S billion)
Oil exports
90.19
119.15
68.09
64.50
55.40
33.57
55.75
Non-oil exports
22.60
26.70
29.20
28.37
33.57
31.03
28.22
Total imports
75 45
78 03
68 73
63.58
70 90
52.40
6313
Trade balance
3734
6782
2856
29.29
18.07
12.20
20.84
Current
27.55
5850
23.36
25.10
13.57
9.0l
account balance
Change in
0.95
16.38
21 44
12.2l
13.18
8.56
international reserves
2 23
7.66
Source of data: Iran Central Bank, External Trade Statistics; Gozideh amaar v ettelaat kalaan eghtesaadi, September 20l7
3
- 185 -

governments and international corporations to expand
their trade and investment links with Iran. Many European
and Asian diplomats and trade delegations visited Iran
in this interim period, and several memorandums ol
understanding were signed (providing for implementation
dates after January 16, 2016). The most significant and
immediate of these agreements focused on restoring import
and export links that were severed during the sanctions.
Table 3. Countries with Largest Volumes of
Exports to Iran
I
UAE
UAE
UAE
China
2 Germany Germany
China
UAE
3
France
China
South Korea Turkey
4
Switzerland Turkey
Italy
South
Korea
Iran's external trade data for 2016 and 2017 show that
the lifting of sanctions, along with Iran's re-engagement
initiatives since June 2015, led to a sharp increase in the
volume of imports by 2017, but non -oil exports, which are
dominated by petrochemical goods, did not experience a
significant increase (Table 2). Iran's non -oil exports, which
were disrupted as a result of the sanctions, were restored
during 2016, but they suffered a moderate decline of 3.6% in
mid-20I7. Petrochemical exports increased in the first seven
months of 20I7, but their growth was overshadowed by
a decline in exports of other products, such as natural gas
condensates.
China South Korea Switzerland
5
India
South
6
The U.K. Germany Germany
Korea
Source: Tehran Chamber of Commerce, Industries Mines and
Agriculture. http://www.tccim.ir/english/
20l7 list is based on five month trade data for March to July 2017.
http://sedayiran.com/fa/news/161279/
Surprisingly, despite sanctions and other adverse
factors, the total volume of Iran's non -oil exports did
not experience a significant setback between 201l and
2016 (see Table 1):
It declined modestly in 2013 and had
Table 2. Foreign Trade before and after the
Nuclear Agreement
a good recovery in 2014. This is partly owing to the sharp
devaluation of the Iranian rial in 2013, which made exports
more attractive.
Annual growth rate
6.5%
Exports of
Although the aggregate import statistics do not show
any major effect of sanctions, the shortage of many
critical imports created a significant burden for Iranian
producers and consumers alike from 2012 to 2015. Iran's
manufacturing sector depends heavily on
16.83
16.45
I7 08
industrial goods
Annual growth rate
imports of
2.2%
3.8%
Imports
24.08
23.62
26.92
Annual growth rate
1.9%
14.0%
Imports of
20.15
20 81
23.83
industrial goods
Annual growth rate
3.3%
14.5%
critical parts and advanced machinery which might not
account for a large share of the country's total imports,
but play a crucial role in many industrial and commercial
operations. Shortages of these imported items were partly
offset by a vast smuggling network, but many firms had
to cut back production. The removal of sanctions and the
sharp increase in Iran's export revenues led to a substantial
improvement in the availability of intermediate imports for
domestic industries in 2016 and 2017.
Source of data: Iran Ministry of Industry, Mines and Commerce
(Monthly Reports numbers 29 and 40)
International Imvestment in the Oil Sector
Major European economies were among Iran's top trade
partners before the 2012 European Union economic
sanctions. Germany, France, and Italy, for example, were
among Iran's top five import origins but gradually lost
their positions to Asian countries. Since the sanctions
were lifted, Iran has increased its trade with European
countries but as of mid-20l7, none of them had become
one of Iran's top five trade origins (Table 3). Germany's
exports to Iran between April and September 20l7 were
I0.3% larger than for the same period in 2016, and Germany
was the sixth largest exporter to Iran in 2017. Iran's imports
from several other European economies also rose sharply
between April and September of 2017.
Attracting foreign investment and reestablishing links with
international oil companies (10Cs) that had suspended
cooperation with Iran during the sanctions has proven
more challenging than boosting oil output. This is partly
owing to the unilateral U.S. sanctions that have remained
in effect after January 2016 and the hostile attitude of
the Trump administration toward Iran: IOCs are still
concerned about being punished by the United States for
cooperation with Iran
Another factor was domestic opposition to foreign
investment in Iran's energy sector. As a result of political
disagreements, the oil ministry was unable to finalize the
guidelines for cooperation with IOCs by January 2016. It
unveiled a new foreign investment contract model (Iran
4
- 186 -

Petroleum Contract) for the oil and g
- 187 -
a
s sector in November
Investment Promotion and Protection Act (FIPPA),
which was approved in 2002 by both the Parliament and
the Expedieney Discernment Council (majma' tashkhis
2015, but hard line opponents of President Rouhani
demanded deep revisions to safeguard the domestic energy
sector from foreign domination, and the Supreme Leader
expressed his support for a detailed review and reform of
the new model As a result of these internal debates and
negotiations, final approval of the new petroleum contract
by the Iranian parliament was delayed until September
maslihat-e nezaam), offers strong incentives and guarantees
with respect to the profitability and safety of foreign
investments." It is, rather, caused by the high levels of
several risk f
ctors: corruption, erratic and contradictory
2016. The oil ministry promised to hold the first tenders
under this new contract law in October 2016, but domestic
opposition and political pressure to add additional
amendments postponed the process several times.
The election of Hassan Rouhani to a second term
in
May 20I7 finally paved the way for the signing of the
first contract under the new law, in July 20l7. Under this
contract, the French oil comp
a
ny Total (with a 50.1%
interest) and the Chinese state-owned oil and gas company
CNPC (30%) partnered with the
Iranian state-owned
company Petropars (19.9%) to develop phase Il of the South
Pars (offshore) gas field (SPI)" This twenty year, five­
billion -dollar contract is expected to produce two billion
cubic feet of gas (400,000 barrels of oil equivalent) per day
starting in 2021
The growing hostility of the United States toward Iran
under the Trump administration, however, has cast a
shadow over Total's commitment to this projeet. Since
President Trump's decertification of the nuclear agreement
in October 2017, the risk of new U.S. sanctions against
Iran has increased. Total has significant investments in the
U.S., and it has announced that if new U.S. sanctions put it
at risk of being penalized, it might have to withdraw from
the South Pars project. This would be a major setback for
Iran's efforts to engage European firms in its energy sector,
but the South Pars project might continue without Total's
participation. There are some indications that the Chinese
partner, CNPC, might take over Total's share in the project
and become the sole foreign partner, with an 80.I% stake.''
Investment in Other Sectors
Historically, Iran has not been as successful as other Middle
Eastern countries such as Turkey, Saudi Arabia, and the
UAE
in attracting foreign capital. Thus,
Iran received
$4.27 billion and $4.66 billion in (realized) foreign direct
investment (FDI) during 20I1 and 2012, respectively,
whereas in 2012, Turkey and Saudi Arabia attracted $13.28
and S12.18 billion FDI, respectively. As a result of sanctions
and an inhospitable business climate, FDI inflows into Iran
declined steadily after 2012, to $2.05 billion in 2015 (a 56%
decline from 2014). This downtrend came to an end in 2016,
with the attraction of $3.37 billion FDI, 64% larger than in
2015.°
This underperformance is not a result of restrictive Iranian
foreign investment laws. On the contrary, Iran's Foreign
a
a
commercial regulations, and geopolitical risk factors,
including economic sanctions. The increase in 2016 FDL
noted above is a positive development, but it falls short
of the amount of FDI that the government would like to
attract.
According to the projections in Iran's sixth Economic
Development Plan (2017 21), Iran must attract an average
of $20 billion per year in FDI in order to meet its industrial
growth targets. Not only have the realized FDI inflows been
far below this amount, but Iran has been able to attract
only $7.38 billion in approved foreign investment projects
from January 2016 until September 2017. And based on
Iran's past history, these approved projects are vulnerable
to considerable implementation delays and cancellations.
Iran's Foreign
Investment Board (hi'at sarmaych goz
ari
khareji) has recently reported that it approved 26 FDI
projects worth $885.8 million during April July 2017. This
was followed by the approval of 36 projects worth $3.012
billion during August October 20l7, which coincided with
the first hundred days of Hassan Rouhani's second term
If this information can be considered reliable, it points
to a noticeable increase in (pledged) foreign investment
inflows since Rouhani's second-term victory. Rouhani's
government is trying to attract more FD] in order to bring
advanced technology into the country and boost economic
activity. While the rising volume of approved FDI is a
welcome development for Iran, implementation of these
approved projects will depend on many factors, including
various types of business risks.
Iran's business climate is still less hospitable than that
in many comparable countries with respect to attracting
FDI, but it is gradually improving. Since the nuclear
agreement, we have observed moderate improvements in
Iran's international ranking in several global
indexes of
business climate (Table +). Iran's ranking in the Global
Competitiveness Index fell from 66 (among I++ nations)
to 82 and 83 in 2013 and 2014, respectively." Although it
gradually rose to 69 in 207, after the nuclear agreement,
it is still far from other comparable countries, such as the
United Arab Emirates (l7), Saudi Arabia (0), Azerbaijan
(5),and Turkey (53)
There have also been marginal improvements in Iran's
relative ranking in several other indexes. The most recent
data for the Ease of Doing Business Index shows that Iran's
ranking deteriorated from 1++ in 2012 10 152 in 2014° This
5

was followed by an increase to Il7 and 120 in 2016 and
20l7, respectively, which indicates a significant relative
improvement. The
Index of Economic Freedom, which
sectors depends on the government's spending policies.
In this section we look at how the economic conditions
of ordinary
Iranians have changed since the nuclear
measures how free private businesses are from government
interference, has shown an
agreement
improvement in 20l7, and
as a result, Iran's ranking has risen from I7I
in 2016 to
Houschold Spending and Consumption
155 in 2017. This improvement has moved Iran from the
Repressed" to the "Mostly Unfree" category.
As the January 2018 protests demonstrated, at least a
segment of Iran's population does not feel any tangible
improvement
in their economic conditions despite
Table 4. Iran's Rank in Global Business Climate
higher oil revenues and better economic growth. Annual
surveys of household income and expenditures also show
a
Global
less positive economic picture than is projected by
Competitiveness
macroeconomic indicators.
66
82
83
74 76
69
Index
Index of Economic
171
168
17
171
171
155
Freedom
Ease of Doing
144
145
152
130
117
120
Business Index
The Global
I04
113
120
106
78 75
Innovation Index
Good Market
98
110
120
109
Ill
100
Efficiency Index
Source of data : Iran Ministry of Industry, Mines and Trade, Monthly
Report number 40, October 20l7, Table I, w w w.mimt.gov.ir
An analysis of the most recent survey results for 2016
and 20I7 by Djavad Salehi-Isfahani offers a valuable
explanation. His findings show that when we compare
per capita household expenditures (which are an indirect
proxy for per capita income), we observe a divergence
among residents of Tehran, residents of urban areas other
than Tehran, and residents of rural areas. Salehi-Isfahani
has shown that per capita household expenditures in
metropolitan Tehran have increased since 2012, but they
have declined moderately in other urban areas and even
more in rural areas. Even more significantly in terms of
understanding the recent protests, the decline outside
metropolitan Tehran followed positive
Iran's ranking in the Global Innovation Index (GIi) also
shows a noticeable
income growth
improvement in 2016 and 2017.
in earlier years, which coincided with the Ahmadinejad
presidency.
This index measures a country's capacity for business,
social, and
industrial
innovation. The
Iran country
report associated with the GII for 20I7 identifies a highly
educated labor force in science and engineering, a large
ratio of capital formation to GDP, a large ratio of high­
and medium -tech firms to all firms, and a large number
of scientific publications and patents per capita as the
country's strengths with respect to innovation. Having
moved to the 7th position in 20l7, Iran now ranks next to
Tunisia and Argentina in innovation achievements.
r'
Impact on Iranians' Standards of Living
Many aggregate economic
indicators, including some
discussed above, show that there has been an overall
improvement in the macroeconomic situation of Iran
since the nuclear agreement, which is not surprising
Crude oil production and export levels have returned
Under Ahmadinejad, what increased standards of living
for rural and small-town households was the introduction
of a per capita income subsidy program as a substitute for
fuel price subsidies, along with his frequent visits to distant
provinces, which were always associated with a release
of government funds for local development projects.'
For low-income households, these per person subsidies
(equivalent to 90 USO when they were first introduced)
made a big difference, because of their low consumption of
energy products as well as their low incomes. Over time,
however, the purchasing power of these cash subsidies
has diminished because of inflation, and on account of the
failure of the Rouhani government to increase their nominal
value?' In addition, the economic benefits of the nuclear
agreement, such as larger volumes of imports and the
reestablishment of global trade and investment links, have
benefited Tehran and other large industrial cities more than
other areas of Iran, because of the larger concentration of
industrial and commercial activities in these regions
to those of the pre sanctions period. The inflation rate,
which rose to 40% per year in 2013, has returned to the
I0% range (although at the expense of high interest rates
and an economic slowdown). While these changes point
to tangible gains for Iran's economy since the nuclear
agreement, what matters more for ordinary Iranians is the
impact of these improvements on their wages, incomes, and
job opportunities. Since oil and gas export revenues belong
to the government, their injection into various economic
Job Opportunities and Unemployment
Another economic challenge that affects most households
directly is the high unemployment rate in Iran, particularly
among young adults. The pace of economic recovery in the
non -oil sector, which is the main engine for job creation in
the Iranian economy, has been slow, and persistent political
6
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risks have at the same time deterred many domestic and
foreign investment initiatives which might have generated
more employment. The latest employment data show a
positive but insufficient trend in job creation since the
nuclear agreement. The severe economic conditions in 2014
huge financial losses stemming trom privatized government
assets that they were forced to purchase. Though in recent
years Iranian domestic media have exposed many of the
financial abuses and corruption scandals in the banking
system, there has been little progress
in prosecutions
led to the loss of 30,000 jobs, but 128 million additional
jobs were created in 2015 and 2016. This level of job
creation, however, has not been sufficient to reduce the
high unemployment rate
related to these cases or implementation of needed reforms
Consequently, the financial system and the entire economy
remain vulnerable to a major banking crisis in the near
future. These shortcomings have also reduced available
bank funds for the purposes both of investment and of
consumer loans.
The entry of large groups of young adults into the labor
market and the re-entry of some unemployed workers who
had previously stopped looking for work increased the
overall unemployment rate from 10.6% in 2014 to 12.4% in
2016. Even more alarming are the data for youth (age l5­
In addition to the growing news surrounding these
corruption cases
in recent years, which have eroded
the public's confidence
in the efficiency and fairness
29), whose unemployment rate rose from 20.9% in 2014 to
25.9% in 2016. There was a marginal improvement in 20l7,
as total unemployment and youth unemployment declined
to IL7% and 24.4%, respectively, in the summer. Many
of these unemployed youths are university graduates with
high expectations.
of the government, Rouhanf's proposed 2018 19 fiscal
budget includes a few controversial items that may have
contributed to the frustration of some of the protesters in
the recent demonstrations. In accordance with his long
standing economic reform program, Rouhanf's proposed
budget calls for a substantial reduction in the number of
individuals who will qualify for subsidies. This change
will affect many households for whom these subsidies still
make a big difference. Another proposed change that upset
many people was a proposed 50% increase in the price of
gasoline, which will still remain well bellow international
market prices even after this adjustment.
There are also large geographical gaps in job opportunities.
The protests that erupted in early January 2018 occurred
mostly in less developed small towns: Comparing the
unemployment rate of these towns with the national
average has revealed that the youth unemployment rate in
many of these areas has been much higher than average in
2017.
Mismanagement and Corruption
These changes are necessary to reduce the large budget
deficit but they were harshly criticized by Rouhanf's
opponents
in the weeks before the recent protests.
While the burden of economic sanctions on
Iran's
The budget bill also for the first time included detailed
economy has diminished since the nuclear agreement,
several domestic political factors as well as weaknesses
expenditure
lines for several religious foundations, and
In governance continue to have a negative impact on the
economic situation of ordinary Ira mans.
many Iranians were upset by the proposed increases in
budgetary support for these institutions while the subsidies
were being cut.
Some domestic challenges are rooted in those of Iran's
political institutions that influence the direction and pace
of economic reform. After more than three decades, Iran
has had only partial success in its economic reform and
privatization program. Large segments of the economy,
particularly in manufacturrng and heavy industries, remain
under the direct or indirect control of the government, or
of religious foundations or the Islamic Revolution Guards
Corps (IRGC). Hassan Rouhani has had limited success
in his efforts to reduce their economic influence. And
even when these institutions operate efficiently, ordinary
citizens perceive them as discriminating in favor of regime
insiders and their supporters.
The Financial Burden of Iran's Foreign
Interventions
While the United States and Iran's regional adversaries
are worried about the geopolitical implications of Iran's
military interventions and support for non -state actors,
many domestic opponents and critics of the
Islamic
regime are concerned about the financial costs of these
interventions
in Syria, Iraq, Yemen, and elsewhere.
The state -owned banking system has also been under
severe financial stress as a result of political interference
(which leads to corruption
in administrative
lending
Although public discussion of Iran's foreign policy is off­
limits to ordinary citizens, complaints about this financial
burden frequently come up in private conversations. While
no exact or official financial data are available about these
expenditures, many Iranians believe that these costs are
substantial and take away valuable resources that should be
spent on the domestic economy. This view was on display
in several slogans during recent protests, such as I give my
policies)." Many state-owned banks are insolvent because
they are faced with a large amount of loan defaults and
7
- 189 -

life for Iran, not Gaza, not Lebanon and "Let go of Syria,
think about us."
There are no official data on the cost of Iran's proxy wars
and of its support for non state groups such as Hezbollah,
Hamas, and various Shia militia groups in
Iraq; but
The Trump administration's hostility to the nuclear deal
has been an obstacle to Iran gaining more from its being,
as it put it, "open for business." Foreign investment flows
have increased but remain below potential because of the
anticipated risks of new sanctions as well as weaknesses
in Iran's domestic business climate. Some major European
firms that had signed muluibillion dollar deals with Iran
after the nuclear agreement are delaying their deliveries for
fear of new US. sanctions.
some Western intelligence officials have offered indirect
estimates of approximately SI billion per year for Hezbollah
and $60 million per year for Hamas. Military assistance
to Iraqi groups fighting the Islamic State in 2014 was
estimated at $1 billion." Supporting Bashar al-Assad's
regime in Syria has been even more costly, as
Iran has
directly participated in military operations; but estimates
of the financial costs of Iran's involvement in Syria vary to a
large degree, making them largely meaningless.
The slow economic recovery of the past two years is also
partly due to domestic factors, such as the anti -inflationary
economic policies of the Rouhani government, corruption,
and economic mismanagement. Many Iranians also blame
the high costs of Iran's military involvements in Iraq and
Syria and its support for various proxy groups in the
Middle East for reducing the resources that the government
can devote to improving the domestic economy.
The available data on Iran's official fiscal budgets show a
large increase in the defense budget since 2014. Between
2014 and 20I7, it grew by 7I%, from $9.29 Billion to $15.9
billion. The defense budget, however, is not an accurate
estimate of the cost of Iran's proxy wars, because a large
portion of it is spent on domestic expenses of the military
Furthermore, some financial resources outside of the official
defense budget, such as government economic assistance
and donations by religious foundations, are also spent on
development and reconstruction projects in Lebanon, Syria,
and other Middle East locations
Overall, according to a 2015 estimate by the US. treasury,
the magnitude of the resources that are spent on
Iran's
The recent protests in Iran and the sympathetic public
reaction to the economic grievances of the protesters
demonstrate that a significant portion of the population
continues to feel severe economic stress. In response to
growing public pressure, the government is likely to devote
more resources to job creation and anti-poverty programs,
but ongoing tensions with the U.S., Israel, and Saudi Arabia
will pose significant geopolitical risks to Iran's ability
to achieve high economic growth rates. Whether or not
President Rouhani in his second term can convince the
Supreme Leader and the IRGC to reduce Iran's non-nuclear
tensions with
proxy wars and client organizations is not as high as
some critics or ordinary Iranian citizens maintain. But
supporting these key regional allies (Hezbollah, Syria, and
Iraq) is so crucial for Iran's overall Middle East strategy
that the Islamic regime will resist any domestic pressures to
reduce funding for as long as possible
its adversaries for the sake of economic
prosperity is an open question
LI
Endnotes
Conclusion
Two years after the implementation of the JCPOA, the
economic dividends of the nuclear deal for Iran are visible
at the aggregate macroeconomic level but have not yet led
to a tangible improvement in the day to-day economic
situation of many Iranian households. Iran's oil production
exceeds
2
sadcraat I2 milion boshkch naft kham dar sal 2013 miladr", [Export
of 1.2 Million b/d Crude Oil in 2013] Fars News. July 25,
2014,[in Persian]: U.S. Department of Energy, U.S. Energy
Information Administration, "Today in Energy: Under
Sanctions, Iran's Crude Oil Exports Have Nearly Halved in
Three Years," June 24,2015.
Iraq and Iran Boost Oil Exports in Sales Battle with Saudis,"
3
its pre -sanctions level and oil exports have
Bloomberg, October 9, 2017.
U.S. Energy Information Administration, Monthly Energy
Review,Table IL la World Crude Oil Production: Selected
OPEC Members," January 2018, p. I72.
increased sharply, providing significant oil revenues to
the government: Iran's GDP grew in 2016 and 2017. But
that growth was driven mostly by the oil sector, while the
non -oil sector has grown at only a moderate pace. Import
bottlenecks have ended, but although industries no longer
suffer from severe shortages of parts and machinery, non
oil exports actually declined in 20I7. The moderate growth in
the non-oil sectors has not created sufficient additional jobs
for Iran's large numbers of unemployed workers and new
job seekers.
4
Central Bank of Iran, Balance of Payments-Current Account
Table, Economic Trends No. 87, July 16, 2017,p. 13.
5
Europe Receiving 40%of Iran's Crude Oil Shipments,"
6
Financial Tribune, December 3, 2017.
When President Rouhani began his first term in August
2013, the inflation rate was above 30%, and his government's
first economic priority was to reduce this to under IO% as
fast as possible. As a result, a conservative fiscal policy and
high interest rates were adopted, which led to the 2015
8
- 190 -

economic recession. Rouhani and his team considered this
to amount to a necessary economic surgery and argued that
restoring price stability (which for Iran means an annual
inflation rate at or below IO%) would lead to faster economic
growth in the long run
20 World Bank Group, Doing Business."
21 Cornell University, SC Johnson College of Business;
INSEAD, and World Intellectual Property Organization
(WIPO), Global Innovation Index 20I7 (0th ed.).
22 Djavad Salehi Isfahani, Tyranny of Numbers: Poverty and
Living Standards in Iran after the Nuclear Deal," djavadsalchi
7 Switzerland (+4%), Italy (329%), Netherlands (38%), United
Kingdom (186%) France (24%). See: "I5keshvar omdch sader
konandch naft c kham ra beshcnasid," [Know the Top I5Crude
Oil Exporting Countries]. Sedaye Iran [in Persian].
8 The impact of these shortages was visible in all sectors, but
nowhere more so than in Iran's aviation industry. A shortage
of spare parts, combined with Iran's inability to purchase
new airplanes, increased the safety risks of commercial
aviation and limited its growth. See Aaron S. Goldblatt and
Roozbeh Aliabadi, How Sanctions Relief Will Impact Iran's
Civil Aviation Industry," The Hill, June 5, 2014.
com, January 3, 2018.
23 Metropolitan Tehran, other urban areas, and rural areas
account for 16%, 58%, and 26% of Iran's population,
respectively. Since households do not report their incomes
accurately so as to avoid taxes, economists consider the
reported expenditures of surveyed households as a more
accurate measure of their standard of living
24 Nader Habibi, The Economic Legacy of Mahmoud
Ahmadinejad," Working Paper (Brandeis University,
Crown Center for Middle East Studies, April 2014)
25 Rouhani wanted to replace these universal subsidies with
targeted subsidies for the poor, to reduce their financial
burden and increase the nominal value of such subsidies for
those who are eligible, but so f
9 Since Iran prohibits foreign ownership of assets and reserves
in its oil and gas sector, it has generally used buy -back
contracts for cooperation with international oil companies
The oil companies, however, had warned that they would
not work in Iran under these old buy back contracts any
longer. As a result, Iran had to develop new petroleum
contracts in order to attract foreign investment in the oil and
gas sector
r this reform has not been
approved
Io Gregory Brew, The Future of Iran Oil Is 'Shrouded in
Mystery," Business Insider, July 12, 2016.
I Iran Parliament Endorses New Oil Contract," The lran
Project, September 17, 2016.
I2 "National Iranian Oil Co. Says IPC Tenders Postponed Due
to Elections," Financial Tribune, May I7, 2017.
1 Iran: Total and NOC Sign Contract for the Development
of Phase Il of the Giant South Pars Gas Field," Total, July 3,
2017.
+ Chen Aizhu and Ron Bousso, Exclusive: China's CNPC
Weighs Taking Over Iran Project If Total Leaves Sources,"
Reuters, December 15, 2017.
I5 Source of FDI data: UNCTAD (United Nations Conference
on Trade and Development), World Investment Report
2016.
I6 FIPPA guarantees several noncommercial risks, such as
restrictions on currency transfer, nationalization, and
expropriation; government intervention; and breach of
contract by government. Foreign investments are subject
to a flat 25% corporate income tax, but there are provisions
for many exemptions and tax holidays, and investment
in agricultural projects is 100% exempt (permanently).
Investments in industry and mining are subject to 80%
exemption for four years, which will upgrade to 10O% for
twenty years if located in less -developed regions. http://
re.majlis.ir/fa/law/show/133816 [in Persian]
I7 bar rasi sarmaychgoz
- 191 -
a
ri kharcji dar Iran," [An Analysis of
Foreign Investment in Iran], Ghatrch, October 7, 20l7, [in
Persian].
I8 jazb sarmaychgozari kharcji ycksad million dolari tavasot yck kasb
va kar-c novin bakhsh crtchatat va fan@vari etcla'at," [Attraction ol
a One Hundred Million Dollar Foreign Investment in a New
Business Activity in Communication and Data Processing]
IRNA [in Persian].
I9 See World Economic Forum, GCI Global Competitiveness
Index
a
26 Data from Statistical Center of Iran (Labor force statistics).
27 Iran: Nine Provinces Register Single -Digit Unemployment
Rates in Summer 20I7," Financial Tribune, October 29, 2017.
28 The unemployment crisis among Iran's educated youth
is detailed in Nader Habibi, Iran's Overeducation Crisis:
Causes and Ramifications," Middle East Brief, no. 89
(Brandeis University, Crown Center for Middle East
studies, February 2015).
29 amar bikari dar shahrhaye mokhtalef," [Unemployment
Statistics for Various Cities], Ghatrch, January 4, 2018 [in
Persian]"
30 Habibi, The Economic Legacy of Mahmoud Ahmadinejad."
31 Administrative lending policies" refers to the allocation
of bank resources according to quotas determined by the
government for each type of loan. The Iranian government
can exert such control because all major banks are state­
owned.
32 "Clergy Secures Millions of Dollars in Iran's Budget Bill,"
Radio Farda, December 15, 2017
33 Saeed Kamali Dehghan, "Rouhani Acknowledges Iranian
Discontent as Protests Continue," The Guardian, December l
2017.
34 Tehran's Proxy Wars: How Iran Spends Its Billions," The
Weck, January 2, 2018.
35 Missy Ryan and Loveday Morris, The U.S. and Iran Are
Aligned in Iraq against the Islamic State For Now," The
Washington Post, December 27, 2014.
36 Majid Rafizadeh, Iran Military Gets Financial Boost to
Expand Power," Arab News, February 22, 2017.
37 U.S. Department of the Treasury, Testimony of Treasury
Secretary Jacob ]. Lew before the Senate Foreign Relations
Committee on the Iran Nuclear Agreement," July 23, 2015.
Weblinks are available in the online version at
www.brandeis.edu/crown
9

Brandeis University Crown Center
for Middle East Studies
Mail»top 010
uhthr, Muschett
02454-9110
781-736 5320
781-736-5324 Fax
www.bradei.edu/erown
The Iranian Economy Two Years after the
Nuclear Agreement
Nader Habibi
Recent Middle East Briefs:
Available on the Crown Center website: www.brandeis.edu/crown
Shai Feldman and Khalil Shikaki, "Trump's Jerusalem Declaration and
The Ultimate Deal,"' No.114
David Siddhartha Patel, "The Communal Fracturing of the Jordanian
Muslim Brotherhood," No. 11
Carla B. Abdo-Katsipis, "Islamists in Power and Women's Rights: The Case of
Tunisia," No. I12
Serra Hakyemez, "Turkey's Failed Peace Process with the Kurds: A Different
Explanation," No. Ill

- 192 -

Annex 139
A. Paivar, “Nuclear Deal: Is Iran’s economy better off now?”, BBC, 4 May 2018

- 193 -

- 194 -

Nuclear deal: Is Iran's economy better off now?
on bbc.com/news/world-middle-east-43975498
Middle East
By Amir Paivar BBC Persian business reporter
4 May 2018
Related Topics
Image copyright AFP
The 2015 nuclear deal between Iran and six world powers - the US, Russia, China, the UK,
France and Germany - lifted international sanctions on Iran's economy, including those on
oil, trade and banking sectors.
In exchange, Iran agreed to limit its nuclear activities.
US President Donald Trump has repeatedly threatened to abandon the agreement and will
make a decision on 12 May about whether to reintroduce sanctions from his country.
So, as that deadline draws nearer, Reality Check examines how Iran's economy has fared
since the nuclear accord came into effect.
1/5
- 195 -

Image copyright AFP
Image caption Carpets for sale in
Tehran's Grand Bazaar.
How much have oil exports boosted Iran's economy?
Iran's economy was in a deep recession in the years before the nuclear agreement. But the
International Monetary Fund reported that the real GDP of Iran grew 12.5% in the first year
following the implementation of the deal.
Economic growth in Iran
GDP growth rate%
International
sanctions imposed
Nuclear deal implemented;
sanctions lifted
15
12
9
6
3
0
-3
-6
-9
'05
'06
'07
'08
'09
'10 11
'12
'13
'14
'15
'16
Source Central Bank of lran
Growth has fallen since then, and the IMF estimates the economy will grow at 4% this year,
which is healthy but below the 8% target Iran had for the five years following the deal.
That initial boost was almost all thanks to the hike in oil exports.
Sanctions on Iran's energy sector halved the country's oil exports, to around 1.1 million
barrels per day in 207 3. Now Iran exports almost 2.5 million barrels daily.
215
- 196 -

Image copyright AFP
,\
:4
'
-'
What about other famous Iranian exports, like pistachio nuts?
Iran's non-oil exports in the year to March 2018 reached $47bn (£34.5bn) which is almost
$5bn more than the year before the nuclear agreement.
According to Iran's ministry of agriculture, the export of "signature items" such as pistachio
nuts stood at $1.1bn in the same period, slightly lower than the previous year.
But Iran's agricultural exports, including pistachios and saffron, are more affected by the
country's drought, rather than sanctions or trade relations.
Following the nuclear agreement, the US lifted a ban on Iranian luxury items such as
carpets and caviar. Sanctions cut exports of Iranian carpets to the US- its biggest market ­
by 30%.
Iran's trade with the European Union has increased significantly thanks to the lifting of
sanctions but China, South Korea and Turkey remain Iran's top three trading partners.
Image copyright AFP
Image caption US Secretary of State
John Kerry and Iranian Foreign Minister
Javad Zarif in Austria on the day
international sanctions on Iran were
lifted.
•
•
•
Did the nuclear deal stabilise Iran's falling currency?
In 2012, the rial lost almost two-thirds of its value against the dollar because of sanctions
and domestic mismanagement of the currency market. The sanctions limited Iran's oil
revenues and its access to the global banking system.
Iranian President Hassan Rouhani promised the nation that following the nuclear deal "you
will not see the exchange rate go up every hour".
Mr Rouhani managed to deliver on that promise by keeping the Iranian currency stable for
almost four years. But in late 2017, when President Trump refused to certify the nuclear
deal to Congress, the rial started to fall again.
3/5
- 197 -

The rial has lost almost half of its value against the dollar since last September. Many
Iranians have been buying hard foreign currency to hedge against the possible future
collapse of the nuclear deal, the return of sanctions and a fresh currency crash.
It was reported that some $30bn of capital left Iran in the first quarter of 2018, mostly to
neighbouring countries and the Caucasus.
The Iranian government has since launched a crackdown on the foreign exchange market,
banning exchange offices from selling hard currency and introducing limits (at $12,000) on
cash possession - all in a bid to rescue the rial.
Household budgets in lran since 2005
Figures in real terrs
U Doler
14 000
13, 000
12.000
11.000
=
2007
2011
200
2013
2016
tu
Are ordinary Iranians richer because of the nuclear deal?
Analysis by BBC Persian of figures from the Central Bank of Iran shows that household
budgets (the value of all the goods and services used by a household) have fallen in real
terms from $14,800 in 2007-08 to $12,515 in 2016-17.
Household budgets declined steadily for seven years until 2014-15 when the nuclear deal
was struck and increased slightly the following year.
The analysis also shows that Iran's middle class has been hit the hardest in the past
decade. While the average household budget has fallen 15%, the figure is 20% for middle­
class families.
Experts blame a combination of domestic mismanagement of the economy and
international sanctions for the fall in household budgets.
Most of the post-nuclear deal boom came from increased oil revenues that go directly into
the government coffers and that takes time to trickle down into people's pockets.
Read more from Reality Check
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- 199 -

- 200 -

Annex 140
A. Fitch and I. Talley, “U.S. Companies Wind Down Iran Business After Nuclear Deal
Pullout”, The Wall Street Journal, 5 June 2018

- 201 -

- 202 -

DOWJONES A NEWS CORP COMPANY
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WORLD I MIDDLE EAST
U.S. Companies Wind Down Iran Business
After Nuclear Deal Pullout
Honeywell, GE, Dover among the companies shutting down presence before sanctions start to bite
The South pe gas feid iKg hear the souther raua pot of Assalouyeh ra The country'senergy sector
has been draw for foreign companies since the 2016 ruder deal 4OTO: ABDIN TAHERKE NAREH/EPA
/SHUTTER5TOCK
By Asa Fitch and Ian Talley
Updated June 5, 2018 451pm.ET
Dozens of major American companies are preparing to pull out of Iran as the Trump
administration closes a narrow legal window that has allowed firms to operate there
without violating U.S. sanctions.
The companies using the exemption include big conglomerates like Honeywell
International Inc., Dover Corp. and General Electric Co. and insurers like Chubb Ltd.,
many of which sought to proft from growth in the Iranian energy industry. Some of the
companies have already booked millions of dollars in revenue from their Iranian
business, underscoring the high commercial stakes of the Trump administration's
decision to revive economy-crippling sanctions against Iran.
In all, at least 17 U.S.-listed companies did business with Iran using foreign subsidiaries
after the Iran nuclear deal went into effect in January 2016. Their total Iran-linked
revenues since then amounted to more than $175 million, according to an analysis of
Securities and Exchange Commission flings. Many more privately held companies may
also have done business in Iran through subsidiaries but aren't subject to SEC
disclosure rules.
Now some of those companies are hastening to shut down their foreign subsidiaries'
activity with Iran to avoid crushing U.S. sanctions expected to begin taking effect in
November.
President Donald Trump's move in May to exit from the nuclear deal spells the end of
the Obama administration's so-called General License H, which allowed U.S. companies
with foreign subsidiaries to trade, finance, insure and invest in Iran. The exemption
afforded by the license was part of the carrot-and-stick approach the Obama
administration used to extract concessions from Iran, using the promise of economic
rejuvenation through U.S. investment, though only indirectly through foreign
subsidiaries.
Thee sanctloin will further cut the lrnla regime off from busing the global fine al
yte.
--Treasury Under Secretary Sigal Mandelker
Mr. Trump and his supporters saw the Iran deal as inadequate because it failed to
address Iran's military presence in the Middle East and its development of ballistic
missiles capable of reaching U.S. allies like Israel. Like all the other sanction
exemptions the administration is revoking over the next six months, U.S. officials say
yanking License H is designed to isolate Iran politically, financially and economically as
Washington tries to pressure Tehran into a fundamentally new military stance in the
region.
- 203 -

"These sanctions will further cut the Iranian regime off from abusing the global
financial system," said Sigal Mandelker, Treasury's undersecretary for terrorism and
financial intelligence.
The U.S. Treasury says U.S.-based firms operating under that license have until
Nov. 5 to wind down their operations or risk penalties-the same time frame for
new bans against other dealings with Iran's economy except for some specially licensed
trade in medical and food goods.
The withdrawal has drawn a fiery response from Iran, which has vowed to quickly scale
up its nuclear program if European leaders can't work out an agreement to continue
the deal without the U.S. On Tuesday, Ali Akbar Salehi, the head of Iran's atomic
agency, said the country had constructed new infrastructure for building advanced­
enrichment centrifuges, according to the official Islamic Republic News Agency.
Centrifuge development hadn't started, however, and the activities at a facility in the
central city of Natanz were currently within the strictures of the nuclear deal, he said.
License H was designed to ease crippling sanctions imposed by the Obama
administration in 2012 once the nuclear deal took effect in 2016. It gave companies a
way around remaining U.S. sanctions on Iran for terrorism, human-rights violations
and its ballistic-missile program.
Unlike several European companies such as Siemens AG, Renault and oil giant Total,
which made splashy moves into Iran, few American firms drew attention to their
Iranian dealings. But many had big plans for a market with a population of around 80
million people and some of the world's largest oil and gas reserves.
Now some are heading for the exit.
Illinois-based Dover, a manufacturing conglomerate, said the revocation of License H
would end its business in Iran. Dover had been selling spare parts for pumps used in
Iran's energy infrastructure and was set to earn more than $16 million in revenue from
contracts signed there since the beginning of 2017, according to regulatory filings.
The Wall Street Journal reported last week that GE is pulling back from its foreign
subsidiaries' work in Iran. The company had revenue of about $24.8 million on sales of
valves and spare parts for Iran's energy industry, among other contracts, according to
regulatory filings.
"We are adapting our activities in Iran as necessary to conform with recent changes in
U.S. law," a GE spokeswoman told the Journal last week. "GE's activities in Iran to date
have been limited and in compliance with U.S. government rules, licenses and policies."
Honeywell has booked around $115 million ofrevenues from Iran through its non-U. S.
subsidiaries since the beginning of 2016, largely in the past year, according to
regulatory filings. Unless Honeywell is able to fulfill $100 million in current contracts
by early November, it could lose future potential revenue, given that the firm indicated
in its SEC disclosures that those contracts aren't yet completed.
U.S.-based Honeywell spokeswoman Victoria Streitfeld said the company and its non-U.
S. subsidiaries "operate within the parameters of all applicable U.S. and international
regulations and will continue to do so."
"For those who have live contracts, they'll have to think about how to wind them
down," said Patrick Murphy, a Dubai-based lawyer at Clyde & Co. specializing in
sanctions regimes.
The License H exemption had limits and brought scrutiny on companies using it. There
were restrictions on the use of sensitive technology with national-security
implications, and the foreign subsidiaries couldn't employ Americans.
The hoped-for benefits of the nuclear deal never fully materialized for Iran. While the
country was able to export more of its oil, average Iranians didn't reap the rewards, as
inflation and unemployment rates remained in the double digits and remaining U.S.
sanctions deterred investment.
The end of the deal and the withdrawal of License H could cause headaches especially
for American insurers. A handful of them have used the permission to cover whole
fleets of ships, some of which began calling at Iranian ports after the nuclear deal. Such
insurers could face penalties if they don't stop providing protection for ships carrying
oil and other cargo into Iranian ports.
Validus Holdings, for example, said in its first-quarter report that its non-U. S.
subsidiaries provide coverage for ship cargo to and from Iran, including crude oil and
relined petroleum products. The company declined to comment for this article, but said
in its March filing that it "intends for its non-U. S. subsidiaries to continue to provide
such coverage to the extent permitted by applicable law."
Write to Asa Fitch at [email protected] and Ian Talley at [email protected]
Corrections &Amplifications
GE had revenue of about $24.8 million on sales of valves and spare parts for Iran's
energy industry, among other contracts, from 2016 through the first quarter of 2018,
according to regulatory filings. An earlier version of this article incorrectly gave the
- 204 -

figure as $24.5 million. (June 5, 2018)
Copy9ht &00py,2017 Dow nes &amp, Company. inc AN Rights Reserved
This copy is for your personal, non-commercial use only To order presentation-ready copies for distribution to your coeagues, clients or customers vist
http /www drepnnts com

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Annex 141
E. Wald, “10 Companies Leaving Iran As Trump's Sanctions Close In”, Forbes,
6 June 2018

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10 Companies Leaving Iran As Trump's Sanctions Close
In
'forbes.com/sites/ellenrwald/2018/06/06/10-companies-leaving-iran-as-trumps-sanctions-close-in/
June 6, 2018
share
Trending
Investing #BigBusiness Investing #BigBusiness Jun 6, 2018 @ 03:14 PM
Ellen R. Wald , Contributor Opinions expressed by Forbes Contributors are
their own.
Tweet This
• European leaders came out against America's unilateral
actions and encouraged European businesses to continue
to do business with Iran
• Businesses of all types, ranging from insurance companies
to car manufacturers to shipping companies are now
announcing that they will cease business with Iran
When President Trump announced the return of U.S. sanctions on Iran almost one month
ago on May 8, there was a great deal of skepticism about how many global
businesses would cease operations in Iran or with Iranian agents.
U.S. President Donald Trump speaks during an announcement in the Diplomatic Room of the White House in
Washington, D.C., U.S., on Tuesday, May 8, 2018. Trump said the U.S, will withdraw from the landmark 2015 accord to
curb Iran's nuclear program and that he would reinstate financial sanctions on the Islamic Republic. (Al
Drago/Bloomberg
1/4
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Immediately after Trump's announcement, European leaders came out against America's
unilateral actions and encouraged European businesses to continue to do business with
Iran as long as Iran continues to apparently adhere to the terms of the JCPOA (nuclear
deal). India, a major importer of Iranian oil, declared that it "follows only U.N. sanctions, and
not unilateral sanctions by any country."
Despite the statements from European and Asian leaders in support of Iran, it seems that
America's economic weight is too great to ignore. Businesses of all types, ranging from
insurance companies to car manufacturers to shipping companies are now announcing
that they will cease business with Iran or in Iran because of U.S. sanctions.
Here's a list of some of the larger companies that have announced exits or plans to exit
Iran:
• Total - The French oil company, Total SA, announced it would pull out of the billion­
dollar deal it made with both Iran and the Chinese company CNCP if it could not
obtain a waiver from the United States. The partnership was to develop the South
Pars 11 natural gas field in Iran. Total was the only major international oil company to
sign with Iran since the old sanctions ended in January of 2016. It had a 30% stake in
the gas field, which Iran now intends to give to CNPC.
• Maersk The shipping company A.P. Moller-Maersk announced it would not longer
ship Iranian oil due to the U.S. sanctions. In a statement by the CEO, the company
was clear that it prioritized its business with the U.S. over business in Iran. He was
not clear on exactly when Maersk would cease all operations involving Iranian oil.
In a drydock at a shipyard in northeast China's Dalian, a 300,000-tonne oil tanker is ready for delivery to Maersk. (TEH
ENG KOON/AFP/Getty Images)
• Peugeot - This car manufacturer, owned by PSA Group, signaled it plans to pull
out of Iran unless a sanctions waiver is obtained. It is putting plans into place to wind
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down activities in Iran by August 6, 2018. PSA sold 445,000 cars in Iran last year and
does not currently market in the U.S. In addition to selling cars in Iran, the company
had signed agreements with Iran Khodro Industrial Group to manufacture Peugeot
cars in Iran and with SAIPA to build Citroen vehicles in Iran.
• GE -- General Electric and its subsidiary, Baker Hughes , had made
combined revenue of almost $25 million from contracts with Iran since 2016. These
included deals with MAPNA, an Iranian electricity conglomerate, and contracts to
provide pipelines, valves and other oil and gas infrastructure products to Iranian
companies. GE and Baker Hughes will cease operations in Iran in accordance with
U.S. law. The trade licenses that the company had been operating under are
expected to be revoked in November.
• Honeywell -- Honeywell International Inc., a technology company, had, according to
the Wall Street Journal, over $110 million in revenue from Iran since 2016. It recently
declared it would be pulling out of the country. Recently, a Honeywell subsidiary had
obtained a contract to upgrade the monitoring and control technology at Iran's Tabriz
Petrochemical Company.
• Boeing - Boeing, which had a high profile $20 billion contract for airplanes with Iran
Air and Iran Aseman Airlines, recently announced it will not be delivering the planes
to Iran in light of the new sanctions. The company could have applied for a waiver
from the U.S. government, but it announced on June 6 that it would cancel the
contract instead.
An lran Air Boeing 747 passenger plane sits on the tarmac of the domestic Mehrabad airport in the Iranian capital
Tehran on January 15, 2013. (BEHROUZ MEHRI/AFP/Getty Images)
• Lukoil -The second largest Russian oil company was dubbed one of "the favorites"
to develop oil fields in Iran. But the company decided at the end of May that it would
no longer pursue any joint ventures with Iranian oil companies due to the impending
U.S. sanctions.
3/4
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• Reliance -- Reliance Industries Ltd., an Indian company that owns the world's largest
oil-refining complex, announced on May 30 that ii would no longer accept crude oil
imports from Iran. Because crude oil imports are contracted months in advance,
Reliance will cease importing Iranian oil in October or November.
• Dover- Dover Corp., which manufactures pumps and other products used in the oil
industry, first signed contracts with Iran in 2017. It now plans to end all business with
Iran in accordance with sanctions.
• Siemens -- Siemens Corporation, which manufactures a variety of healthcare,
industry, energy and automobile products, announced it would no longer take new
orders from Iran. It will wind down its business interests there.
Read on here for a rundown of major companies that appear to be staying in Iran, at least
for now.
Ellen R. Wald, Ph.D. is a historian & consultant on energy and geopolitics. She is the
author of Saudi, Inc. and president of Transversal Consulting.
4/4

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Annex 142
S. Hanke, “Iran’s Rial Is In A Death Spiral, Again”, Forbes, 29 July 2018

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Iran's Rial Is In A Death Spiral, Again
19,486 views I Jul 29, 2018, 07.30pm
Iran's Rial Is In A Death Spiral,
Again
�
Steve Hanke Contributor (I)
4e
­
Ali Mohammadi/Bloomberg
Iran's rial plunged from 98,000 IRR/USD on Saturday to 112,000 IRR/USD on
Sunday on Tehran's Ferdowsi Street. That stunning 12.5% one-day plunge has
pushed the rial into a classic death spiral. The last time the rial was in a grip of
such a spiral was back in September 20 I 2.
8
• 4
%
0
The chart below shows the downward roller coaster ride the rial has been on
during the past six months, as well as this weekend's free fall. As the chart
indicates, the official IRR/USD rate is 44,030; whereas, the rate in the black

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Iran's Rial Is In A Death Spiral, Again
2

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Annex 143
M. Milliken & P. Graff, “Trump says firms doing business in Iran to be barred from
U.S. as sanctions hit”, Reuters, 7 August 2018

- 217 -

- 218 -

Trump says firms doing business in Iran to be barred
from U.S. as sanctions hit
uk.reuters.com/article/uk-iran-nuclear/trump-says-firms-doing-business-in-iran-to-be-barred-from-us-as-sanctions-hit­
idUKKBN1KS13L
Middle East & North Africa
August 7, 2018/ 12:48 PM / 6 months ago
BEIRUT/LONDON (Reuters)· Companies doing business with Iran will be barred from the
United States, President Donald Trump said on Tuesday, as new U.S. sanctions took effect
despite pleas from Washington's allies.
Iran dismissed a last-minute offer from the Trump administration for talks, saying it could
not negotiate while Washington had reneged on a 2015 deal to lift sanctions in return for
curbs on Iran's nuclear programme.
Trump decided this year to pull out of the agreement, ignoring pleas from the other world
powers that had co-sponsored the deal, including Washington's main European allies
Britain, France and Germany, as well as Russia and China.
European countries, hoping to persuade Tehran to continue to respect the deal, have
promised to try to lessen the blow of sanctions and to urge their firms not to pull out. But
that has proven difficult: European companies have quit Iran, arguing that they cannot risk
their U.S. business.
"These are the most biting sanctions ever imposed, and in November they ratchet up to yet
another level. Anyone doing business with Iran will NOT be doing business with the United
States. I am asking for WORLD PEACE, nothing less!" Trump tweeted on Tuesday.
Iranian Foreign Minister Mohammad Javad Zarif criticized Trump's tweet as a tired cliche
and denounced "US unilateralism."
"And it is not the first time that a warmonger claims he is waging war for 'world peace',"
Zarif tweeted.
White House national security adviser John Bolton said on Monday Iran's only chance of
escaping sanctions would be to take up an offer to negotiate with Trump for a tougher
deal.
"If the ayatollahs want to get out from under the squeeze, they should come and sit down.
The pressure will not relent while the negotiations go on," Bolton, one of the
administration's main hawks on Iran, told Fox News.
On Tuesday, Bolton said the sanctions were already working, deterring European
companies: 'The European governments are still holding to the nuclear deal, but honestly
their businesses are running from it as fast as they can so that the effect of the American
sanctions really is proceeding regardless."
Few American companies do much business in Iran so the impact of sanctions mainly
1/3
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stems from Washington's ability to block European and Asian firms from trading there.
Among large European companies that have suspended plans to invest in Iran are France's
oil major Total and its big carmakers PSA and Renault.
"We have ceased our already restricted activities in Iran in accordance with the applicable
sanctions", said German car and truck manufacturer Daimler.
REMOVE THE KNIFE
Washington accepts that Iran has complied with the terms of the 2015 deal reached under
Trump's predecessor Barack Obama, but says the agreement is flawed because it is not
strict enough. Iran says it will continue to abide by the deal for now, if other countries can
help protect it from the economic impact of Washington's decision to pull out.
Tuesday's sanctions target Iran's purchases of U.S. dollars, metals trading, coal, industrial
software and its auto sector. Global oil prices rose on Tuesday on concern sanctions could
cut world supply, although the toughest measures targeting Iran's oil exports do not take
effect for four more months.
Global benchmark Brent crude oil futures were up $1 or 1.36 percent to $74.75 per barrel at
1823 GMT.
"It is a reality check that this is happening and that Iran's oil exports will be hurt when the
oil sanctions hit it in November," chief commodities analyst at Commerzbank Bjarne
Schieldrop said.
U.S. President Donald Trump holds a Make America Great Again rally in Olentangy Orange
High School in Lewis Center, OH, U.S., August 4, 2018. REUTERS/Leah Millis
In a speech hours before the sanctions were due to take effect, Iran's President Hassan
Rouhani rejected negotiations as long as Washington was no longer complying with the
deal.
"If you stab someone with a knife and then you say you want talks, then the first thing you
have to do is remove the knife," Rouhani said in a speech broadcast live on state television.
"We are always in favour of diplomacy and talks ... But talks need honesty," Rouhani said.
Iranian Intelligence Minister Mahmoud Alavi said Trump's withdrawal from the deal meant
there was no point negotiating, since Washington had shown it did not abide by its
commitments.
"And Iran, based on past experience, has no trust in negotiating with the American
government."
Russia rebuffs U.S., plans new missiles by 2021
The nuclear deal is closely associated in Iran with Rouhani, a relative moderate who won
two landslide elections on promises to open up the economy to the outside world.
European countries fear that by abandoning it, Washington could undermine Rouhani and
213
- 220 -

strengthen the hand of his hardline opponents.
Britain, France, Germany and the EU as a bloc said in a joint statement on Monday: 'We
deeply regret the reimposition of sanctions by the U.S."
Since the sanctions were initially lifted two years ago, Iranian oil exports have risen. But
many Iranians have yet to see major economic improvement, and the prospect that
Washington would reimpose sanctions has helped drive a collapse in the value of Iran's
currency this year, raising the cost of imports.
Iran's security forces have responded firmly to protests against rising prices. Iran this week
made it easier to access foreign currency and said it was prosecuting an ex-central bank
official for economic crimes.
"(Sanctions) will definitely make daily life harder for Iranians," said Saeed Leylaz, a Tehran­
based economist and political analyst. "But if the government has a serious plan they can
control the situation."
Iraq said it did not agree with the U.S. sanctions on its neighbour, but will abide by them to
protect its own interests.
"As a matter of principle we are against sanctions in the region. Blockade and sanctions
destroy societies and do not weaken regimes," Prime Minister Haider al-Abadi said on
Tuesday.
Writing by Peter Graff and Mary Milliken; Additional reporting by Susan Heavey in
Washington; Editing by Angus MacSwan and James Dalgleish
Our Standards:The Thomson Reuters Trust Principles.
313

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- 222 -

Annex 144
G. Golshiri, “En Iran, l’économie accuse le coup des sanctions américaines”,
Le Monde, 17 September 2018

- 223 -

- 224 -

En Iran, l'~conomie accuse le coup des sanctions am~ricaines
I em o nde. fr/ econ om ie/ article/2018/09/1 7 /en- i ra n-I-eco nomie-accuse-le-coup-des-sancti ons-americai nes_53561 44_3234. htm I
Le 4 novembre entrera en vigueur le second valet des sanctions am~ricaines visant la vente du
p~trole iranien. RAHEB HOMAVANDI/ REUTERS
«La situation est pire qu'entre 2011 et 2013, lorsque /es sanctions internationales avaientfini par
~trangler l'~conomie du pays », d~plore Mahdi, propri~taire d'une usine de d~tergent pour
voitures dans la banlieue de T~h~ran, qui pr~f~re rester anonyme. « Depuis que le rial chute, nous
avons ~t~ obliges de diminuer notre production des deux tiers », explique-t-il. Cet Iranien de 40 ans
a d~j~ d~ remercier 28 de ses 40 employ~s.
D~j~ en mars dernier, il avait vu ses employ~s afghans - nombreux en Iran - repartir vers leur
pays natal ou vers la Turquie, car, pour eux, « cela n'avait plus de sens d'~tre pay~s en rials ».
L'incertitude est telle que Mahdi se demande s'il ne devra pas mettre la cl~ sous la porte d'ici ~ la
fin de l'ann~e iranienne, en mars 2019.
Lire aussi Entre Donald Trump et l'Iran, l'arme du p~trole
Depuis l'annonce, le 8 mai dernier, du retrait des Etats-Unis de l'accord nucl~aire, sign~ en 2015
entre l'Iran et les grandes puissances internationales, et le r~tablissement unilat~ral de s~v~res
sanctions contre T~h~ran, les entreprises europ~ennes quittent le pays et l'~conomie iranienne
accuse le coup.
Le rial d~pr~ci~ de 72 % par rapport au dollar
113
- 225 -

La fin des liaisons d'Air France vers T~h~ran, ce 18 septembre, ajoute la compagnie a~rienne
fran~aise ~ la liste des groupes occidentaux (Total, Daimler, British Airways, Peugeot, Renault...)
qui, trop expos~s aux Etats-Unis, ont pr~f~r~ ~viter les foudres de Washington.
Lire aussi P~trole : la production mondiale atteint des records, les prix en hausse
Le 4 novembre entrera en vigueur le second valet des sanctions am~ricaines visant la vente du
p~trole iranien. Le premier valet comprend, depuis le 6 ao~t, des blocages sur les transactions
financi~res et les importations de mati~res premi~res, ainsi que des mesures p~nalisantes sur
les achats dans le secteur automobile et l'aviation commerciale.
Les entreprises occidentales quittent le pays, a I 'imaged' Air France, qui interrompt ce I8 septembre ses
liaisons vers T~h~ran.
Malgr~ les d~clarations du pr~sident iranien, Hassan Rohani, assurant que la crise sur le march~
de devises est r~solue, la monnaie iranienne, le rial, ne cesse de d~gringoler face au dollar. Ce
16 septembre, le billet vert s'achetait ~ 143 000 rials contre 40 000 en f~vrier, soit une
d~pr~ciation de 72 %.
Bien que les bureaux de change aient re~u, d~but ao~t et apr~s quatre mois d'arr~t, la
permission de reprendre leurs activit~s, ils refusent encore aujourd'hui de vend re dollars et
euros, obligeant les Iraniens ~ aller se fournir aupr~s des marchands de rue ill~gaux qui
demandent beaucoup plus que le taux pratiqu~ sur le march~ officiel.
Pour enrayer la chute du rial, le pr~sident Rohani a d'abord impos~ un taux fixe de 1 dollar pour
42 000 rials iraniens, alors que le billet vert s'achetait et se vendait beaucoup plus cher sur le
march~ noir. Ainsi, pendant quatre mois, seuls certains importateurs de produits de premi~re
n~cessit~ pouvaient b~n~ficier de ces dollars « gouvernementaux ». Or cette mesure, annul~e
d~but ao~t, a donn~ lieu ~ des cas d'abus et de corruption, attisant la col~re de la population.
L'instabilit~ sur le march~ des devises, conjugu~e aux sanctions am~ricaines, p~nalise des pans
entiers de l'~conomie. D'apr~s les sources officielles, la production d'automobiles a diminu~ de
38 % entre le 23 juillet et le 22 ao0t. Le secteur de la restauration conna1t une baisse de 40 %. Et
le pouvoir d'achat des ouvriers aurait baiss~ de 70 %, affirment certains ~conomistes.
Une inflation de 18 %
Selan les chiffres de la Banque centrale iranienne, l'inflation a atteint 18 % en ao0t en rythme
annuel, contre 8 % ii ya un an. Taus les prix ont augment~, notamment ceux des produits
alimentaires.
« A cause de l'envol~e du prix des produits que nous utilisons, nous avons ~t~ oblig~s d'augmenter de
44 % nos tarifs depuis le mois de mars, explique Ped ram qui produit des salades en barquette, a
T~h~ran. Dans ce contexte, les gens mangent beaucoup moins dehors. Disons que nous ne faisons
plus de b~n~fices. » Et si auparavant cet Iranien de 37 ans envisageait de chercher des financeurs
213
- 226 -

europ~ens afin de d~velopper son business, il a d~sormais laiss~ tomber « cette illusion ».
« Aujourd'hui

- 227 -
,
je sais que je mettrai les cl~s sous la porte si le dollar atteint les 200 000 rials », glisse-t­
il.
Face ~ cette situation, T~h~ran a, fin ao~t, d~nonc~ « l'~tranglement » de son ~conomie par
Washington devant la Cour internationale de justice (CIJ), o~ ce pays de 80 millions d'habitants a
engage une proc~dure visant ~ enjoindre aux Etats-Unis de suspendre leur embargo.
Ghazal Golshiri (T~h~ran, correspondance)
R~agissez ou consultez l'ensemble des commentaires
Les plus lus
Edition du jour
Dat~ du vendredi 29 mars
Lire le journal num~rique
s £elllonde
D~pendance : comment trouver 9 milliards d' euros
Services
313

- 228 -

Annex 145
D. Bowman, “Dubai exports to Iran plummet”, Arabian Business, 18 November 2018

- 229 -

- 230 -

Dubai exports to Iran plummet
arabianbusiness.com/dubai-exports-iran-plummet-82635.html
By Dylan Bowman
Tue 18 Nov 2008 12:48 PM
arabian d
BuSIneSS
Related companies
Dubai Chamber of Commerce and Industry
Value of exports to Islamic Republic fall 15.4% in Q3 compared to Q2, dragging down total
exports 1.7%.
Dubai exports to Iran plummet
Dubai exports declined slightly during the third quarter compared to the previous quarter
as exports to Iran plummeted 15.4 percent, the Dubai Chamber of Commerce and Industry
said on Tuesday.
The Dubai Chamber said the value of exports and re-exports to Iran fell to 11.8 billion
dirhams ($3.2 billion) in Q3 from 14 billion dirhams in Q2, dragging down Dubai's total
exports 1.7 percent to 56.6 billion dirhams for the quarter.
Iran accounted for almost 25 percent of Dubai exports in Q2, according to Dubai Chamber
figures. This declined to around 20 percent in Q3.
The Dubai Chamber said Saudi Arabia overtook Iran to become Dubai's largest export/re­
export destination. During the quarter, total value of export/re-export to Saudi Arabia was
12.3 billion dirhams, or 21.7 percent of the total export.
The UAE is Iran's top trading partner and there are an estimated 450,000 Iranians living in
the emirates. About 10,000 Iranian firms operate in the country, chiefly Dubai, according to
Iranian figures.
Iran's statistics put bilateral trade at $11.7 billion dollars in the Iranian year which ended in
March 2007, with imports from the UAE forming the bulk of the exchanges at $9.2 billion.
1/1

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Annex 146
“Two More Income Brackets Dropped Below Poverty Line”, Iran International,
19 November 2018

- 233 -

- 234 -

Economy
Iran Monday, 19 Nov 2018 21.18
Two More Income
Brackets Dropped
Below Poverty
Line
Akbar Torkan, president Rouhani's consultant
announced that: 'Two more income brackets
have dropped under the poverty line and the
middle class has been reduced from 6 income
brackets to four, while their income has
reduced by half in value."
According to Tasnim News, Akbar Torkan
stated that: "the two lower income brackets
have increased to four" and added: "In such a
society that poverty is so widespread, you see
million-dollar cars parading in the streets."
- 235 -

Torkan confessed that "the economic growth of
the country is lower than predicted", and
explained: "We have over 3.5 million
unemployed waiting to join the labor market.
Meanwhile, our maximum capacity for creating
jobs would be 700000 a year."

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Annex 147
“Live IRR exchange rates in Iran's free market”, www.bonbast.com/historical/usd,
29 March 2019

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- 238 -

Live IRR exchange rates in Iran's free market
bonbast.com
u 1295.05
t$ 432900
as 1875000
$ 4710000
0ts 15220
$ 13550
1398/1/9
Iranian Rial Exchange Rates. Fri, 29 Mar 2079 15:00:01 All prices are in Iranian Toman (1 Toman= 1 O Rials)
Code
Currency
Sell
Buy
uso US Dollar
13550 13450
I EUR Euro
15220 15070
GBP British Pound
17705 17505
r HF Swiss Franc
13620 13470
I+I CAD Canadian Dollar 10140 10040
6 AUD Australian Dollar 9615 9515
;Es6 Swedish Krona
1465
1450
HE NOK Norwegian Krone
1575
1560
n RUB Russian Ruble
208 205
==IHB Thai Baht
427 424
sGD Singapore Dollar
10005 9905
E HKD Hong Kong Dollar 1725
1695
K AZN Azerbaijani Manat 7945 7845
10 Armenian Dram 278 274
AMD
Code
Currency
Sell
Buy
: DK Danish Krone 2040 2020
L. AED UAE Dirham
3690 3670
112
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10
Japanese Yen 1225
·PY
1215
TRY Turkish Lira
2400 2380
a cNY Chinese Yuan 2020 2000
Ea SAR KSA Riyal
3610 3580
.IR
Indian Rupee
195
193
MR Ringgit
3320 3290
AFN Afghan Afghani 178
176
L wo Kuwaiti Dinar 44575 44175
2 00
1oo 1aqi Dinar
1140
1130
8Ho Bahraini Dinar 35940 35440
l OMR Omani Rial
35200 34900
QAR Qatari Riyal
3720 3690
Gold Coins
Sell
Buy
@
4550000 4400000
Azadi
e1
4710000 4610000
Emami
-1/2Azadi 2550000 2450000
-1/4Azadi
1650000 1550000
Q1gAzadi
900000 850000
Bonbast.com App for Android
212

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Annex 148
“Euro to Rial rate 2018-01” and “Euro to Rial rate 2018-11”, www.bonbast.com,
13 May 2019

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- 242 -

(EUR/IRR) Euro to Rial rate 2018-01
bonbast.com/historical/eur/2018/01
Select a currency and a date:
/IRR: Iranian Rial
• (EUR/I RR) Euro to Rial rate. All prices are in Iranian Toman (1 Toman= 1 O Rials)
Date
Sell Buy
2018-01-01 5450 5380
2018-01-02 5490 5430
2018-01-03 5535 5435
2018-01-04 5340 5260
2018-01-05 5340 5260
2018-01-06 5300 5230
2018-01-07 5320 5280
2018-01-08 5370 5330
2018-01-09 5345 5310
2018-01-10 5400 5350
2018-01-11 5420 5360
2018-01-12 5420 5360
2018-01-13 5405 5375
2018-01-14 5450 5420
2018-01-15 5475 5445
2018-01-16 5495 5465
2018-01-17 5550 5510
2018-01-18 5590 5550
1/3
- 243 -

2018-01-19 5590 5550
2018-01-20 5650 5610
2018-01-21 5860 5750
2018-01-22 5840 5780
2018-01-23 5700 5600
2018-01-24 5710 5670
2018-01-25 5710 5650
2018-01-26 5710 5650
2018-01-27 5685 5645
2018-01-28 5710 5670
2018-01-29 5770 5730
2018-01-30 5795 5755
2018-01-31 5870 5820
Sell Buy
Average 5557 5504
Max
5870 5820
Min
5300 5230
Jan 1, 2018 5,450 5,380
Sell
Buy
6,000
Jan 2, 2018 5,490 5,430
Jan 3, 2018 5,535 5,435
5,750
Jan 4, 2018 5,340 5,260
5,500
Jan 5, 2018 5,340 5,260
5,250
Jan 6, 2018 5,300 5,230
Jan 7, 2018 5,320 5,280
5,000
Jan 8,
Jan 15,
Jan 22,
Jan 29,
2018
2018
2018
2018
Jan 8, 2018 5,370 5,330
Jan 9, 2018 5,345 5,310
2/3
- 244 -

Jan 10, 2018 5,400 5,350
Jan 11, 2018 5,420 5,360
Jan 12, 2018 5,420 5,360
Jan 13, 2018 5,405 5,375
Jan 14, 2018 5,450 5,420
Jan 15, 2018 5,475 5,445
Jan 16, 2018 5,495 5,465
Jan 17, 2018 5,550 5,510
Jan 18, 2018 5,590 5,550
Jan 19, 2018 5,590 5,550
Jan 20, 2018 5,650 5,610
Jan 21, 2018 5,860 5,750
Jan 22, 2018 5,840 5,780
Jan 23, 2018 5,700 5,600
Jan 24, 2018 5,710 5,670
Jan 25, 2018 5,710 5,650
Jan 26, 2018 5,710 5,650
Jan 27, 2018 5,685 5,645
Jan 28, 2018 5,710 5,670
Jan 29, 2018 5,770 5,730
Jan 30, 2018 5,795 5,755
Jan 31, 2018 5,870 5,820
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313
- 245 -

(EUR/IRR) Euro to Rial rate 2018-11
bonbast.com/historical/eur/2018/11
Select a currency and a date:
/IRR: Iranian Rial
• (EUR/I RR) Euro to Rial rate. All prices are in Iranian Toman (1 Toman= 1 O Rials)
Date
Sell
Buy
2018-11-01
16460 16310
2018-11-02
16485 16335
2018-11-03
16455 16305
2018-11-04 16960 16810
2018-11-05
16900 16750
2018-11-06
16740 16590
2018-11-07
16825 16675
2018-11-08
16745 16595
2018-11-09
16625 16475
2018-11-10 16325 16175
2018-11-11
15930 15780
2018-11-12 15615 15465
2018-11-13 15210 15060
2018-11-14 14680 14530
2018-11-15 14180 14030
2018-11-16 14295 14145
2018-11-17 14790 14640
2018-11-18 15415 15265
1/3
- 246 -

2018-11-19 15035 14885
2018-11-20
15055 14905
2018-11-21
14940
14790
2018-11-22
14595 14445
2018-11-23
14530 14380
2018-11-24 14405 14255
2018-11-25
14405 14255
2018-11-26
14205 14055
2018-11-27 13815 13665
2018-11-28
13095 12945
2018-11-29 13320 13170
2018-11-30 13300 13150
Sell
Buy
Average
15244 15094
Max
16960 16810
Min
13095 12945
Nov1,2018
16,460 16,310
Sell
Buy
18,000
Nov 2, 2018
16,485 16,335
Nov 3, 2018
16,455
16,305
16,500
f
Nov 4, 2018
16,960 16,810
15,000
Nov 5, 2018
16,900 16,750
13,500
Nov 6, 2018
16,740 16,590
Nov 7, 2018
16,825 16,675
12,000
Nov 8,
Nov 15,
Nov 22,
Nov 29,
2018
2018
2018
2018
Nov 8, 2018
16,745 16,595
Nov 9, 2018
16,625 16,475
Nov10,2018 16,325 16,175
2/3
- 247 -

Nov11,2018 15,930 15,780
Nov 12, 2018 15,615 15,465
Nov 13, 2018 15,210 15,060
Nov 14, 2018 14,680 14,530
Nov 15, 2018 14,180 14,030
Nov16,2018 14,295 14,145
Nov 17, 2018 14,790 14,640
Nov 18, 2018 15,415 15,265
Nov 19, 2018 15,035 14,885
Nov 20, 2018 15,055 14,905
Nov 21, 2018 14,940 14,790
Nov 22, 2018 14,595 14,445
Nov 23, 2018 14,530 14,380
Nov 24, 2018 14,405 14,255
Nov 25, 2018 14,405 14,255
Nov 26, 2018 14,205 14,055
Nov 27, 2018 13,815 13,665
Nov 28, 2018 13,095 12,945
Nov 29, 2018 13,320 13,170
Nov 30, 2018 13,300 13,150
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313

- 248 -

Annex 149
Witness statement of Mr J. Mehdizadeh, Director of Economic Research and Policy
Department, Central Bank of Iran, 21 August 2018

- 249 -

- 250 -

(6 $j
BANK MARKAZI JOMHOURI ISLAMI IRAN
(The Central Bank of the Islamic Republic of Iran)
Witness Statement
I, Jafaar Mehdizadeh, director of Economic Research and Policy department of the
Central Bank of the Islamic Republic oflran (CBI), testify as follows:
1- I have been appointed as the director of Economic Research and Policy department
of the CBI since December 2015. I was employed by CBI in 2003 and since then I
have been recruited by the Bank. I held various positions in the Bank including head
of Monetary Policy division and deputy of Economic Research and Policy department.
I have personal and direct knowledge of the facts hereinafter stated except where it is
indicated that matters are based on information or belief, in which case I believe the
relevant matters to be true.
2- As a result of the U.S. withdrawal from the JCPOA on 8 May 2018 and re­
imposition of sanctions against Iran, economic growth, investment, export and import
would be severely affected due to aggregate uncertainty in the economy and Iran
disconnection from the global financial system.
3- The U.S. sanctions would have and are currently having many negative effects on
various macroeconomic indicators such as GDP growth, employment, inflation, and
various welfare indicators of households.
4- The sanctions would lead to budget deficit sometime soon and a contraction in pro­
growth spending. The budget's reliance on oil revenue was 32% in 2017-18. The
unexpected decrease in oil revenue could adversely impact on government
expenditures. The direct impact of this decrease will appear in the form of restrictions
on the supply of public goods and reduction in public expenditure in infrastructures,
which will in tum lead to a fall in households' welfare. Decline in government
expenditure, for example, on health care, to which part of oil export receipts are
usually extended is one of the direct impacts of the imposition of oil sanctions, hitting
the low-income and vulnerable groups the hardest.
5- The lower investment by both public and private sectors not only could constrain
Iran's growth in 2018-19, but could also adversely affect potential growth on the long­
run.
6- The value of Iranian currency (rial) has been decreasing for months against foreign
currencies. From May 1 to August 20, 2018, rial depreciated against dollar (euro) by
78.5% (68.6%) in parallel exchange market. Considering the sharp increase in the
exchange rate, which has noticeably raised the price of food products, the low-income
groups of the society will be the hardest hit by this shock. It is important to note that
P. O. Box : 15496/33111, no 198 Mirdamad Avenue, Tehran, Islamic Republic of IRAN
Website: www.cbi.ir Tel : 29951 Fax : 66735674
I
- 251 -

('6
$j
BANK MARKAZI JOMHOURI ISLAMI IRAN
(The Central Bank of the Islamic Republic of Iran )
"food and beverages" group has the remarkable share in the consumption basket of
low-income groups. Reviewing food price developments in all urban areas indicates
that the price of IO major groups in the food basket of urban households accelerated
by 16.4 percent in July 2018 compared to April 2018.' Thus, the amount of needed
calorie on the food basket of various income groups could not be sufficiently
provided. This will lead to malnutrition and threaten the health condition of the
community members over time. Meanwhile, the continuation of this situation will
remarkably increase health and medical care costs and adversely affect the vulnerable
groups of the society.
Table 1: Change in Price of Food and Beverages
Subgroups
Percentage change
(July compared to April 2018)
Bread and cereals
4.1
Meat
6.7
Fish and seafood
12.6
Dairy products and birds' eggs
2.8
Fats and oils
10.2
Fruits and nuts
51.9
Vegetables, pulses and vegetable products
9.6
Sugar, cube sugar, jam, honey, chocolate, and
5.5
confectionery products
Salt, spices, dressings, sauces, and similar
5.5
compounds
Beverages
11.6
Food and Beverages group
16.4
7- Increase in foreign currency rates and a decrease in G
- 252 -
D
P in 2018-2019 in light of
uncertainties would have inflationary effects. Figure 1 shows Consumer Price Index
(CPI) inflation rate touched 18% on July which has been the highest rate since 2014.
The inflation rate has been raised by 8.3 percentage points from March to July 2018.'
2
1
Iranian calendar is different from international one. Therefore, a month in Iranian calendar is not exactly
correspondent with international calendar.
Te inflation rate is month-over-month percentage change in the Consumer Price Index.
P. 0. Box : 15496/33111, no 198 Mirdamad Avenue, Tehran, Islamic Republic of IRAN
Website: www.cbi.ir Tel : 29951 Fax : 66735674

('6 $j
BANK MARKAZI JOMHOURI ISLAM! IRAN
(The Central Bank of the Islamic Republic of Iran )
Figure 1: Inflation rate (%)
M
16
16
12
IO
18.7
20177
7017.1
a'---------------------'
270152
20161
20167
•
8- Imposition of sanctions will affect- the repayment of debts (both principal and
subordinated). On the one hand, government revenues will decline in the aftermath of
reduction in oil exports, which in turn causes the government to default on its debts.
On the other hand, with the imposition of restrictions on financial transfers resulting
from the halt in correspondent banking relationships, the government will still fail to
repay its debts despite having the required resources. This will lead to the weakening
of the credit worthiness of the country and the deprivation of Iran's economy from
long-term foreign financing or make financing possible only under much higher costs.
Prior to the concluding of the nuclear deal when the Central Bank of Iran was
sanctioned, most financing and repayment channels were blocked, causing Iran's
external debt to increase by about 236.0 percent in 2012-13, in comparison with the
year before. This was against the backdrop of a remarkable current account surplus,
which was in tum attributable to the growth of oil export revenues.
9- Amid the expected sharp decline in oil receipts and facing limited access to
financing, the government has no other choice but cut pro-growth spending to contain
the overall level of the deficit. Oil sanctions directly impacts GDP by decreasing oil
production and indirectly affects GDP by reducing the government expenditures and
heightening uncertainty in the economy.
10- Sanctions have also created uncertainty that discourages any investment by
foreign parties in Iran. The sanctions re-imposed by the U.S. in the areas of
transportation, energy,
insurance, and banking transa
tions discourage the
- 253 -
c
international companies to enter into Iranian market and this will incur significant·
costs to Iranian economy.
I I- The sanctions and restrictions enumerated above will in several respects cause
irreparable harm to Iranian economy.
12- In sum, the U.S. withdrawal from the JCPOA has led to pessimism throughout the
country that all trade-related matters including production and investment would be
negatively affected.
3
P. O.Box : 15496/33111, no 198 Mirdamad Avenue, Tehran, Islamic Republic of IRAN
Website: www.cbi.ir Tel: 29951 Fax : 66735674

(6 $)
BANK MARKAZI JOMHOURI ISLAM! IRAN
(The Central Bank of the Islamic Republic of Iran)
STATEMENT OF TRUTH
I believe that the facts stated in this witness statement are true.
Signed:
Dated: August 21, 2018
4
P. O. Box : 15496/33111, no 198 Mirdarnad A venue, Tehran, Islamic Republic of IRAN
Website: www.cbi.ir Tel: 29951 Fax : 66735674

- 254 -

Annex 150
Witness statement of Mr A. Laktabriz, Director General for International Affairs,
Central Bank of Iran, 8 April 2019

- 255 -

- 256 -

'6 gy
o»r Re1. .98/8104
8 April 2019
Date
AN MAKAZI JOMHOURI ISLAMI IRAN
(The Ccntml Bank of he hslaaic Republic of Lras)
Witness Statement
I, Afsaneh Laktabriz, Director General for International Affairs of the Central Bank of the Islamic
Republic of Iran (CBI), testify as follows:
I- I have been appointed as the Director General for 1ntemational Affairs of CBI since March
2018. 1 was employed by CBI in 1991 and since then I have been recruited by the Bank. I
have held various positions in the Bank including research officer, expert, assistant director
and director (all in International Finance Dept:), and Director General, as mentioned above. I
have personal and direct knowledge of the facts hereinafter stated except where it is indicated
that matters are based on information or belief, in which case I believe the relevant matters to
4
be true.
2- As a result of the re-imposition of the U.S. sanctions against Iran on 8 May 2018, economic
growth , exports and imports have been severely affected which for its part significantly
lowers foreign direct investment and capital flows and disconnects Iran from the global
financial system.
3- The U.S. sanctions have many negative effects on various macroeconomic indicators such as
GDP, inflation, various welfare indicators.of households, and unemployment.
4-. The sanctions have led to budget deficit and a contraction in pro-growth spending. The
unexpected decrease in govemment oil revenue has adversely impacted on government
expenditures. The direct impact of this decrease appears in the form of restrictions on the
supply of public goods and reduction in public expenditure in infrastructure, for example, or
health care, to which part of oil export receipts are usually extended is one of the direct
impacts of the imposition of oil sanctions, hitting the low-income and vulnerable groups the
highest.
5- The lower investment constrains Iran's growth potential in 2018-2019 and in the subsequent
years, but also adversely affects potential growth on the long-run.
6- Since the government of Iran was under a good plan and policy struggling to increase the
share of tax revenues in the budget, replacing the oil revenues, so the decrease in economic
activities could reduce a considerable amount of government tax income.
7- The U.S. sanctions have disconnected Iran from global financial system through banning
financial transactions with Iranian banks. So far, banking transfers and remittances of the
following Iranian banks have been rejected by their foreign banking partners due to the re­
imposition of the U.S. sanctions: MELLI, TEJARAT, PARSIAN, KARAFARIN,
EGHTESAD-E-NOVIN, SAMAN, INDUSTRY & MINE, MELLAT, REFAH, EXPORT
DEVELOPMENT, DAY, SEPAH, POST BANK, SINA and PASARGAD.
The U.S. sanctions on SWIFT significantly hamper the activities of CBI and Iranian banks
for cross-border payment transfers related to oil shipments and other international trades. To
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P. 0.B0X :15875/7177 Mirdamad Blvd.,Y0. 144
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Tehran. ISLAMIC REPUBLIC OP [RAN
Cable : MARKAZBANK Tel 29951 Telex : 213965.-8 MZBK (R
General Mail Address: G. [email protected]
- 257 -

%6 $j
or Rei.N.98/8104
a. 8April3019
BAN MARK AZI JOMHOURI ISLAMI IRAN
(The Central Baal el the eleie Republic of Lrn)
name a few of increasingly emerg
i ng challenges more and more foreign correspondent banks
are announcing stoppage of banking relations with CBI and Iranian commercial banks. It
would not only block the vital channels of financial transactions but also destroy the way of
international financing of Iranian infrastructure projects which has been well paved by
successful Agreements with esteemed and credible European and Asian banks.
9- The U.S. sanctions significantly hamper the project to create an integrated banking network,
electronic banking clearance and automated payments systems.
10- Due to the large number of imports of lran, an increase in the price of importation has also
affected inflation.
11- Amid the expected sharp decline in oil revenues and facing limited access to financing, the
government has no other choice but to cut pro-growth spending to contain the overall level of
the deficit, Considering the noteworthy share of the oil sector in Iran's GDP, the oil sanctions
directly and indirectly impact GDP.
12- Sanctions have also created uncertainty that discourages any investment by foreign parties in
Iran. The sanctions re-imposed by the U.S. in the areas of transportation, energy, insurance,
and banking transactions discourage the big companies to enter into Iranian market and this
will incur significant costs to Iranian economy.
13- The CBl has difficulties in accessing its foreign assets maintained with its trade partners as
well as necessary banking information for the financial sector.
14- The so-called exemptions made by the United States in special areas are inefficient and
ineffective. The termination of the correspondence relations and blockage of Iranian assets,
as well as the restrictions made on financial facilities, particulatly refinance facilities, on the
side of the foreign lenders as a result of the U.S. sanctions prevent any exemption to take
effect. These constraints have made CBI unable to provide banking services for the
importation of essential goods including medicine and pharmaceutical equipment. Given the
fact that the payment and finance channels are blocked, the purported exemptions are futile
and impractical.
N.B.
STATEMENT OE TRUTH
I believe that the facts stated in this witness statement are true.
Name: 9£
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0
Signed: •
Dated:
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P. 0.BOX :15875/7177 Mirdamad Blvd.,NO. 144
s
Tehroa. ISLAMIC REPUBLIC OP IRAN
Cable : MARKAZBANK Tel 20951 Telex:213965.8 MZBK IR
Genera! EMail Address: G. secdept@ CBI.IR
- 258 -

r
The impacts of unilateral US sanctions on the performance of the
foreign exchange section of the Central Bank of Iran (CBI)
Introduction:
Pursuant to the Monetary and Banking Law of Iran of 1972, the Central Bank of
Islamic Republic oflran ('Bank Markazi') intervenes to:
• define the value of the Iranian Rial;
• monitor the balance of payment and finance the foreign trade of Iran; and
• assist the Iranian government in the implementation of the economic policy
and exchange policy of the country.
After the implementation of the Joint Comprehensive Plan of Action (JCPOA) and
mitigation of international sanctions against our country, the Central Bank of Iran
(CBI) and other administrative bodies put the restoration of banking and economic
relations with various countries on their agenda. During this short period, which
was accompanied by the reduction of the scope of multilateral sanctions, intensive
negotiations and valuable efforts were made aiming at the expansion of banking
relations and promotion of economic and financial cooperation with various
countries. Those attempts led to signing of numerous banking MO Us, agreements
and contracts, especially in the field of financing construction and manufacturing
plans and projects. The credit rating of our country, which directly affects the
possibility of financing and its relevant costs, was reviewed by OECD and
experienced one notch improvement to reach 5. Whereas the Islamic Republic of
Iran proved its good will and conduct regarding the fulfilment of JCPOA
commitments to the world and all the participant parties of JCPOA were
implementing its terms, the new US administration unilaterally withdrew from the
JCPOA and re-imposed unprecedented sanctions against our country in some
stages. It put the great Iranian nation under such widespread economic pressure
that even the US authorities themselves called Iran sanctions as the most severe
and paralyzing sanctions in the history of human civilization.
Regarding various aspects of US sanctions, we can briefly refer to the sanctions
against Central Bank of Iran and banking system, sanction on petroleum
transactions, financial messaging services, as well as issuance of insurance policies
GJ
- 259 -

and insurance services which, in general, had a negative impact on the country's
trade including the imports of foodstuffs, medicine and essential commodities for
all people. Among the sanctions which disrupted the economic environment of our
country, the sanction against the banking system, and the Central Bank in
particular, has undoubtedly had the most severe consequences for economic
activities. It should be noted that this statement sets out just some early impacts of
the U.S. measures and their full effects have yet to become clear.
US sanctions after its withdrawal from JCPOA and the breach of the Treaty
of Amity
In order to clarify the scope of unilateral US sanctions against Iran which have
been developed in various layers, first of all we outline the main topics based on
the official declarations of the US administration and then make references to some
of the consequences and effects of sanctions in the field of foreign exchange.
The US administration withdrew from JCPOA on 8 May 2018 and officially
declared that the first round of sanctions would be imposed after 90 days of grace
period for businessmen and economic activists and the second round would be
imposed after 180 days against Iran. The 90-day grace period ended on 4 August
2018 and the nuclear related sanctions were re-imposed as follows;
1- Prohibition of purchasing of US dollar banknotes
2- Prohibition of any kind of trade in gold, silver and precious metals
3- Prohibition of trading minerals such as graphite and raw and semi-finished
metals such as aluminum and steel
4- Prohibition of significant transactions using Iranian Rial or Rial-based accounts
and funds which are being kept outside Iran
5- Prohibition of purchase, subscription and/ or facilitation of Iranian sovereign
debt transactions (such as sovereign bonds)
6- Sanctions on automotive Sector
In the second round which started 180 days after US withdrew from JCPOA on 4
November 2018, the following sanctions were imposed;
- 260 -

1- Sanctions on transactions of foreign financial institutions with Central Bank of
Iran and designated Iranian financial Institutions under Section 1245 of
The National Defense Authorization Act (NDAA), 2012
2- Sanctions on financial messaging services (e.g. SWIFT) to Central Bank oflran
and other Iranian financial institutions as explained in Section 104 of the CISADA
3- Sanctions on the transactions with Iranian national oil company and its affiliates
4- Sanctions on Iranian shipping and ship building sectors
5- Sanctions on subscription, insurance and reinsurance services
6- Sanctions on Iran's energy sector
In addition to the above-mentioned items, the US administration put the name of
hundreds of Iranian institutions as well as legal and natural persons including the
governor and some officials of the Central Bank of Iran in the SDN list.
The impacts of sanctions on the performance of the foreign exchange section
of CBI
1- The Central Bank of Iran performs an essential role in ensuring the
functioning of the Iranian economy which is being interfered by the each
relevant specific element of the US measures referred to. The problems
arising from the new US sanctions which are related to the correspondence
relations , transfer of foreign currency, currency exchanges, treasury
operations and so on can be briefly explained in the three parts below:
1-1 Subsequent to the new US sanctions, most of CBI correspondents such as
Raiffeisen Bank from Austria, DBS from Singapore, DZ from Germany, Aktif
Bank from Turkey, United Bank, and TC bank terminated their correspondence
relations and closed CBI accounts.
1-2 The reason given by the different CBI's correspondents, for terminating or
restricting their relationship with the CBI were all related to the re-imposition of
the U.S. sanctions and notably their fear of being themselves the target of sanctions
and the prohibition to operate transactions in Iranian Rial. Following the
termination/restriction of correspondent relations, Iran has been disconnected
from global financial system through banning of the financial transactions with
Iranians banks. Banking transfers and remittances of the Iranian banks (most of
- 261 -

them) have been rejected by foreign banks and then the amount of the
import/export of the goods and services have been suppressed and restricted
seriously, as well as CBI now indeed is unable to manage its portfolio properly
due to prohibition of purchasing any gold or US dollars and then continues to
suffer huge losses. Appended to this report are examples of letters received by the
CBI after the 8 May 2018 from some of its correspondents, informing of the
termination or restriction of their relationships as a result of the new US
sanctions.(annex No. I)
1-3 Some other CBI correspondents such as BCP from Switzerland, Sumitomo
from Japan, Bank Muscat from Oman, Banca Popolare di Sondrio from Italy, KBC
from Brussels, Hulk Bank from Turkey and Chinese Bank of Kunlun restricted
their correspondence relations and there is no guarantee for the maintenance of
their relations with Iranian banks.( annex No.3)
2- Problems related to the contracts concerning financing construction and
manufacturing plans and projects:
2-1 Due to re-imposition of sanctions, some of the contracts which had already
been made with foreign banks were either revoked or faced problems in their
implementation. In this regard, we can refer to discontinuation of the cooperation
of Danske Bank from Denmark, Oberbank from Austria and lnvitalia Institution
from Italy. Appended to this report are examples of letters received by the CBI
after the 8 May 2018 regarding financing of construction of manufacturing plants
and projects.(annex No.2)
2-2 The credit rating of our country which was revised up from 6 to 5 after
JCPOA, was degraded to 6 on 25/6/2018 due to unilateral US sanctions and based
on the latest decisions made by OECD and It has not been amended again since
June 2018.
2-3 Among the other impacts of sanctions we should point to the impossibility of
using the exemptions made by the United States regarding some sanction areas.
Some financial facilities, especially refinance facilities, which have merely been
dedicated to the imports of essential goods, medicine and pharmaceutical
equipment encountered severe restrictions on the side of foreign lenders.
Since those finance facilities have been dedicated to special purposes, it is quite
obvious that the impossibility to use them will indeed cause some problems in
supply of the above-mentioned items in our country. Besides, termination of
correspondence relations and blockage of the assets of our country will make us
J
- 262 -

unable to support the providing of the essentials mentioned above. This is a clear
evidence of the inefficiency of the exemptions made by the United States in special
areas such as health since the payment and finance channels are blocked.
2-4 It should also be mentioned that the fear and concern of the central and
commercial banks of other countries due to direct and indirect US threats as well
as refraining from establishing correspondence relations and making banking
contracts and implementation of the already-made contracts are among the other
relevant effects of the imposition of sanctions which are affecting the lives of
Iranians in all dimensions.
3- Other foreign exchange issues in society
3-1 Pursuant to the restrictions imposed in International banking relations,
Iranians cannot have and use any debit/credit cards such as Visa or MasterCard
to pay their charges in their trips to abroad and they have to provide banknotes
insteadly, but because of the US measure on 8 May 2018, purchasing of the US
dollar banknotes is prohibited and then Iranians have so many difficulties in
payments Into banknotes.
3-2 The emergence of uncertainty in society and the conversion of physical assets
into foreign currency and their transferring abroad can lead to intensification of
foreign exchange crisis in our country.
The estimation of the losses due to re-imposition of unilateral US sanctions
Regarding the estimation of material and spiritual losses caused by above­
mentioned sanctions, The- CBI is already recording an abrupt decrease in foreign
transactions by Iranian companies and nationals due to the impossibility or severe
complexity to finance them. This decrease is concerning all the sectors of the
Iranian economy, including those, such as humanitarian activities, that should
benefit from exemptions from their actual sanctions regime enforce by the US.
Also, the termination of agreements related to the financing of investment projects
for which the CBI has agreed to provide guarantees, is a clear indication that the
new U.S. sanctions are having a detrimental effect on the development of the
Jranian economy.
Exact determination of the losses suffered by the Iranian population and economy
is not possible at this time, as the effects of the sanctions are still building and wil1
- 263 -

--·-
�------------------�
require additional time to assess their secondary, marginal and future impacts and
consequences and gather the relevant figures and data from other economic sectors
(either governmental or non-governmental) which have been affected by the
undesirable consequences of banking sanctions.
Name: Fak ate'ri z
Signed: fl. �
Date: & ril2019
0
- 264 -

Annex No.I
- 265 -

337»'e­
eoz _
DZ Bank
From: 86~gen, Christian [mailto:[email protected]]
Sent: Thursday, February 07, 2019 11.27AM
To: '[email protected]' <[email protected]>
Subject: WG: DZ Bank
Dear Mr. Mohammadi,
8elw please find a link under which an official statement o( DZ Bank is available.
https://dasersta,pdt de/panorama/archivt2018E-Mail-er-DZ-Bank-an-die­
Fiale,handelskriag122.html
Due to the fact that the article is in German language, her please fid e free Engllsh transl~llon
which could be sent to CBI;
As of: 31.05.2018 11:14 am
E-mail of DZ Bank to the branches
Sent: Wednesday, May 16, 2018 1:27 pm
Subject: Closure of the Iran business on 30.06.2018
Dear Sirs and Madames,
Our central bank DZ BANK informed us about the following:
Considering of the current political development and the US exit from the Joint
Comprehensive Plan of Action (JCPOA), we are forced to discontinue Iran-related payment
· transactions as of June 30, 2018. This means: From July 1, 2018 DZ BANK willreturn all
transactions relating to Iran. Increasing.requirements for the examination of sanction
compliance for merchandise exports as well as the reputation of our Cooperative.Financial
Network Volksbanken Raiffeisenbanken are the main reasons for this decision. Transition
period for existing transactions: Transactions received by us until June 30, 2018 will be
processed until August 6, 2018, provided that we have the necessary documents for sanctlon­
compliant settlement within the framework of our individual case-by-case reviews.
The settlement of domestic payments (currency EUR) of Iranian banks, companies and
individuals resident in Germany shall remain exempted from these restrictions even after 30
June 2018, unless sch transactions are used to settle Iran transactions. "
If you have any questions, please contact the supervisors of the international business under
the following contact details.
In case of any other questions please contact me.
- 266 -

Europisch-ranische. Handelsbank AG • Depenau 2 • D-20095 Hamburg
Vorstand I Board of Management: Or. Ramin Pashaee Fam (Vorsitzender / Chairan), Sabina Hurmarich­
Metzger, Arash Onsori
Aulsichtsrat !Supervisory Board: Dr, Hosein Mehr (Vrsilzsnder / Chairman)
BIC EIHBDEHH • Register. Hamburg HR8 14804 • UST-A0/VAT-ID: DE 118513728
Vertrutichkok: Dloo E·Ma liM. !er Alzgan ent~'t varttuiehs udder rechtfeh gr±chltrte Intratanen. Weni &!e aich derricttige
Adesat aid odor.dleso E-Mad lrtumliah ortalon taben, tlorren Slu bite sc'ort danAbsandar urd I~hen Slo dlese E-Ma, Dos
neteypie Koplorn sowio dfo unbolgte Wolorgab, pvch vpn Tgllen dlo»or E·Mall, sd nkht gostatiet
Sicermet: Die Bonk hot ells varkstr~bi«hen Ma~namen gilzen, mn dat Ris~o dsr Vertreltng Mrenbctallaner Sof worn odor E·Mala z
mhlmlerun. Danoch k~rnsn Mr efgrvnd or Natr dos inomets gs RR!iko eines CamptrMrnbeills di@or E-Ma~ nkht svc~aen, Mr
empiehin Ihnen da her dringend, eigene VarkanMrdlen drtzfmn.
Con~tenoe: Thi E-Mat Ind. all attachmonts may cantahn confident'ei ad/or pegad information, you era not to [tended recipient ar have
received th au? in anor,- plessa notify te bender [mediately grd deleto tl oral, Any nzuthadzed copying, disdosurp r dlsttbular,
evon a/ parts et tls o-a~, ls stity forbidden.
Securty; The bank hos taken prerouts t minimize be dsk ad tatsr!ting sotwre ruses, bu1 novartatess, ttcrding to th nature cf
'
internet to bnk cant guarantee s dean o-au. We urgently advise you t cry at your awn Mr choke on thts -ma}.
gt Think before you print
- 267 -

A
E-Mal er DZ Bunk an die F(Halen [ Das Erste - Panorama - Sendung~n - 2018
i
i
N~chster Sendetermln
0o, 14.02. 2018]2145 Uhr
Start
Sendungen
Meldunger
937_
Service
t
!
Redaktion
-rot,
Stun3105.18 11)4 uh
E-Mail der DZ Bank an die Fillalen
Gesendet: Mittwoch, 16. Mal 2018 13:27
Betreft: Einstellung des rangesch~ft zum 30.06.2018
Sehr geehrte Damen und Herren,
unsere Zentralbank DZ BANK tellte uns folgendes mit:
"Vor dem Hintergrund der aktuellen politischen Entwicklung und dem Asstleg der USA aus dem JCPOA (Joint
Comprehensive Plan of Action) sehen wir uns veronlasst, nun.auch den Zahlungsverkehr mait tranbezug zum 30.
Juni2018 einzustellen. Das bedeutet: Ab dem 1. Juli 2018 wird die DZ BANK s~mtliche Transaktlonen mit
iranbezvg retoumieren. Zunehmende Anforderuungen an die Pr~fung der Sanktionskanfomtt~t fur Warenexporte
als ouch die Wahrung der Reputati
- 268 -
o
n unserer genossenschaftlchen FinanzGruppe Volksbanken
Raiffeisenbanken
sind ma~gebliche Beweggr~nde f~r dlese Entscheidung. Ubergang:fist fur Altgesch~fte Transaktlonen, die uns bis
einschlie~lich 30. Juan! 2018 voliegen, werden wir bis rum 6. August 20.18 abwickeln, sofern ns entsprechende
Unterlagen fr eine sanktion:konforme Abwicklng im Rohmen unserer bishezigen Einze'fallpr~fungen varliegen.
Die Abwicktung des inl~ndischen zahlungsverkehrs{W~hrung EUR) von in Deutschland ans~sslgen iranischen
Banken, Unternehmen und Personen bleibt von diesen Einschr~nkungen auch nach dem 30. Juni 2018
ougenommen, sofern diese Transaktionen nicht zur Abwicklung von Ir
a
ngesch~ften genutzt werden,"
F~r Fragen stehen Ihnen die Betreuer des Auslandsgesch~fts unter den nachfolgenden Kontaktdaten zur
Verf~gung.
CD
Dieses Thema im Programm:
Das Erste ] Panorama [31.05.2018 [
2145 Uhr
··---·
:
I

337.»be
4
·-·-·ctr:_
n
Vorstands-Information
Rndhrelben
Einstellung des lrangesch~ftes
At.re
2RI
rR ir'«c
ri d tis
6A$#lf en Ar
krusen
Sehf geehrte Dom.en und Herren,
&&t$fin an Ma'
trton a4 4 7441
In der Vorands-Infomaion Nr, 2018027 hsben Mr Ste ter dfe pertiefle Aueuung
4 «4 4 1«rial
muttrk.
des dokurent~ren Gesch&tte mit pranbezug (elnscfe~llch prittlndesh~tt) informiert.
Gleihzeltlg batten wir Ihnen mltgeteilt. vorgrs den 2zhlungsverkehr ril {ranbezug im
wAter
Kundenlteresse aufrecht z erhalen.
Morand
wttgr inc.trtr&rt
VollstSndlge Installung des zahlungsverkehr mit Irnhintergrund
tat lg
Vor dem HIntergrund der aktue~len politischen EnwMddung und dem Ausleg der.USA
0i, Os gu2ran
au1 dem JCPOA {Joint-Comprehensive an o! Action; ehen wt ns veranlas$t, nun such
wt'l{en Dle
0, Cdrt. Aas
den Zahlngsverdehr mat lantezug zum 3, 1uni 2018 sinus!ellen.
Mad icvo
Tor it
Das bedeter:Ab dem 1, Juli 2018 wird fie DZ BANK sinliche Tranaktonen mit
±footrautg'er
rnberg retaumieren.
t BM
lake e land
Zunehmende Anfordernpen n de Prtung der Sanktondonformi tr Wareneiporte
ht (col
els zvc die Wahrung der Reputatian serer geposengchatdicheh FnanGrvppe
t&
Vo[ubanken aiffeienbanken sind ma~gebhe Beweggnde fr dlee Entsxheidung.
{:2::..
Par rn a
Obergangstrtit (~r Altgesh~fte
:
.
TranaktJonen, die urus bis enchfelich 30. Jun] 2018 vorliegen, werden wit bs.2um
fnilt, r d
mtTritt, Mi
6. August 2018 bwide!n, soler urts entsprechende Untedagen fr eine
ndureile» et 4
snktlonskonlormne Abwicklung ir Rahmen nserer blherdgen Elnzel[allpr~lunge
4es o. pt t414st
vollegen.
OieAbMcklng des irl~ndischen Zhtngwerkehrs Wirng EUR) von in Deutsch!and
ansssigen irarixhen Banker, Unterrehmen und Peranen blebt von dieen
'
EinsdrEnlungen auch nach demn 30. Jn! 2018 2genommen, solein fee'
Trena/onen nicht zur Abwlung vor lgesct~ften genvizl wprde.
- 269 -

0z BAK
·- ••
Wa bedanken uns t~r tr Verst~ndnis ind.tehen Ihnen fr-R6fragen ge:ne zu
Vet(gung.
Mh (eundiden Gr8¢r
D2 BANK AG
ft A)rdarner fr
ungvarketn·Awttkfng
re!tan
Tr8-enter
fawn.t/ er4Dberwhng
1) 17&-2121 eh.gazutctet.d
?en wnu
:
2;°
- 270 -

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F20 Tran:action Reference Nuber
29025010¢
F21; Related Rafaronea
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ATTN &MANACER OF REMITTANCE DEPT. / COMPLIANCE DEPT,
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OR JFY259,729,515.
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TODAY (JAN28). WE CiNCELD AEV HT202 BEFORE
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BEST REGARDS
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- 271 -

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MUFG BANK, LTD,
(HEAD OFFICE)
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(International Affals Management)
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190260116
21 elated Reference
42$0910133
F79; 2Narrative
ATTN HAAGER OF REMITTANCZ DEPT / COMPLIANCE D5FT.
RE YOUR YT202 VALUE JAN24 REr. 426D970133
FOR JPY824,50B,994,
TODAY (JAN28) Z CANCELED ABV MT2OZ BEFORE
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REASON; DU TO OEAC RECUIATION END OUR BANK POLICY
HE HVE NOT DEBITED ORIGINAL, BHOUJNT AND NO REFUND.
BE8T REGARDS
CAE NO,190290116 / REF TKY-T-LS398
TCIROTK RAITORI
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(CHKFBOA2&6E8A4E)
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- 272 -

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F201 Transaction Reference Numtor
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ATTN MNAGER OF REMITTANCE DEPT I CO{PLANCE DEPT.
RE YOUR MT202 VALUE JAN24 RY,42$0970134
FOR JPY23,008,751,
TODAY (AN2%) W CANCELED ABV YT202 BEFORE
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REASON: DOE TO OFAC REGULATION AND CUR BANK POLICY
3E HAVE NOT D
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EST REGARDS
CASE NO,19020201 / REF TY-1-15392
TCIRUTK HATTORI
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- 273 -

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MUFG BANK, LTO.
(HEAD OFFICE)
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BKMNIRTHUXX
BANK MASKAN
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£20: Tmr9action Reference Number
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ATTN MANAGER OF REKITTANCE OEPT -4 COMPLIANCE DEPT.
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EXECUTION AND TREATED IT AS NULL AND VOID.
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WE HAVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
BEST REGARDS
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TCIROTK HATTO8.I
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- 274 -

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FOR FY222,651,460.
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EXECUTION AND TREATED IT AS NULL AN0 VOID.
REAGON: DUE TO OFAC REGULATION ANO OUR BANK POLICY
·IE HAVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
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CASE NO.190250103 / REF TKY-I-15J35
TCIROTK HATTORI
Messago Trellar
(CHK;FSA278A7A54B)
PKI Signature;: MAC·Equivalent
Euell add
- 275 -

- 276 -

Annex No.2
- 277 -

r.bafekr
From:
Weissmann, Manfred [[email protected]]
Sent:
i..r;FR r.A':Us,'Xl
To:
A.Laktebriz: SH.Ravoshi. HA.ghanbari; r.bafekr; H.Charkhandaz; [email protected];
[email protected]; v.sou@en'bank.ir, [email protected]; H-mohammadi@agri­
bank.com; [email protected]; [email protected]; [email protected];
asgharzedeh@bpi ir: m.aminzare@bmi ir, ss [email protected]; [email protected];
[email protected]; [email protected]; [email protected];
[email protected]; [email protected]; [email protected];
[email protected]; [email protected]; [email protected];
[email protected]: m [email protected]: [email protected];
[email protected]; [email protected], [email protected],
[email protected]; [email protected]: [email protected];
m.khorsandi@karafatinbank,ir; [email protected], [email protected];
[email protected], [email protected]; ali.salehabadi@edbi. ir,
[email protected]; [email protected]; [email protected];
kamran.rezvani@edbiir, [email protected]; [email protected];
[email protected]; [email protected]; [email protected],
[email protected]; [email protected]; [email protected];
[email protected]; h.naderi@sinabank ir, [email protected]; [email protected];
[email protected]; [email protected], [email protected]; s-nouri@persian­
bank.ir; [email protected]; [email protected]; [email protected];
[email protected], [email protected],
[email protected]; [email protected],
[email protected]; [email protected]; [email protected]; [email protected];
[email protected]; [email protected]; [email protected];
[email protected], [email protected].u; [email protected];
[email protected]; [email protected]; [email protected];
thomas.junge@eihbank de
Cc:
Hagenauer. Florian; Raml. Claudia. Reisinger, Melitta; Spiessberget, Astrid; Edlbauer.
Helmut; Hartmann, Gabnele; Kwetina, Melanie; Boyadzhieva. Diana
Oberbank business policy measures with regard to Iranian transactions
Subject:
Dear Board Members, colleagues and friends of the Iranian Banking Industry,
We trust that yo are in good health and we are thankful for having successfully cooperated in bilateral business
transactions until these days.
Unfortunately now and in the light of the withdrawal of the USA from the JCPO and the threat ol secondary US
sanctions by 4 November 2018 at the latest the Oberbank could not help but officially inform its customers about the
possible consequences.
The legal framework conditions for European campanies with regard to business with Iran have changed but there are
still many legally and politically unanswered remaining questions.
Nevertheless we wilt stay committed with the acceptance of transactions for contracts signed before 8 May 2018,
which require fulfilment prior to 4 November 2018 and we will closely monitor the development until this date and
beyond too.
However, the gradual return of the USA to the regime cf sanctions will most probably exclude most of the Iranian banks
from SIFT connection as well as international payment channels will again terminate to a large extent.
As far as the current cover on your EUR account wwithus is concerned we kindly and as a precaution ask you to reduce it
to an amount which will be reserved and entitled for definite businesses with fulfilment prior to 4 November 2018 as
transfers beyond that date cannot be guaranteed.
Please also rest assured that Oberbank will always try to collaborate based on legal possibilities in compliance with the
principle of economic threat in the future.
- 278 -

.....--------------------------------------------·-- --··
[Tossini Silvia [mailto:[email protected] :From
Monday, June 25, 2018 1:03 PM :Sent
HA.ghanbari :To
A.Laktabriz; A.nasiri :Cc
I: Accession of new banks to the MCA :Subject
.Dear Mr Ghanbari
.I hope this mail find you well
.It was a great pleasure to meet you and your delegation in Bruxelles last month
Invitalia Global Investment cannot currently As we anticipated at that time, please be advised that
proceed with any further concrete action relating to the Master Credit Agreement, before the resolution
.of pending technical issues at EU and international level
by Invitalia via private courier ,In this regard, please find attached the letter that has been sent to you
.Global Investment last June 20"
. We should be obliged if you would inform all the Iranian banks about the current state of affairs
.We will promptly inform you of further developments on the scenario
Best Regards
Silvia Tossini
- 279 -

+
..
'­
---.
� .
. . . .
. . ;;•;i:· ... .-·
:Yi.
artment
toyberg.<[email protected]>
ay;May 3;2018·121 PM
.
u,-·----·--· .
..
& bank's relation department
LT Financing/Framework Agreement
our, Mr Rasoolzadeh and Ms Shahabady,
· --- -�
·
.
·
--·· ---- ··-· 2-�1-3 9- ..
redoing well despite all the current·volatility.
et#g@
E@Due to the latest developments and statements from the US government in relation to the JCPOA, and the imminent
"?"introduction of Sanctions, Danske Bank has decided to honour the short term commitments of contracts in which we are
engaged (i.e. received, signed and initiated) with customers, banks and ECAs, but under the terms of the statements
from the US government.
As a further consequence however, we are unable to continue the dialogue on the longer dated financing for the time
being. This is obviously very unfortunate and I can only hope that it's a temporary measure.
f
3
we are dvising our corporate clients similarly today.
If you have any questions then please do not hesitate to get in contact with us.
8rgds, Karsten
Karsten Stroyberg
Global Head - Central Banks & Sovereign Wealth Funds
International Financial Institutions
E-mail: kstr@danskebankcom
Phone: +45 45 12 83 23
Mobile: +45 29 17 90 01
Danske Bank
Holmens Kanal 2-12
+i
1,
1092 Copenhagen K'
Denmark
u~:isedans±shack:ani@an@ialinsiii@ions
htps:{icsenrch nskebnkcom/res~arch;
Dusk Runk AS CVR.nr, 61126228 .Kbenhn
modt•gtt
r�troli�
Denne nl•1' kun ill<;c��lde
infotrn•linn. Har du
- 280 -
'
inform.ctt."f,cnd,i
om ftjr,n - o_g �f1�rf"IJ:t<1dt �ltlle m:iltn i'dir •�Siem
n•niJto vcd en fcjf. hrdrr "i oi!l dtifor
uden at viderescnde elle kopicre den, Selv pm muilen og vtdhz/yede bihg efter vores overbevisning er[;i fax virus og ndre fl, som kn pvirke computer cter it-ysicmct.
hvo: den modtsges og lases. &hnes den
p' modtgcrens cget unf Vi pa:t & ile noget nsv« fa: tub og s&de, sorm er opst~et i forhinudetse me} a mod.ge g btugr
maikr..
.
· .
,
·
.
· :
. f
'
.
.
•
·
·
.
·

Annex No.3
- 281 -

ASAP2 Print Instance - ASAP2 412858{CCES7}) Printed on 8/4/2018 3:03:47 PM »°
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Receiver
EMJIIRTHXXX
BANK MARAZI JOMHOURI ISLAMI IRAN (Central Bank of
Head Office
Tehran IR
--------------------------- Message Text---------------------------
20: Transaction Reference Number
FI Supprt
21: elated Reference
JCPOB
79: Narrative
Attention: Mr Majidi, Assistant Director,
International Dept
Dear Mr Majidi, as you may be aware, there have
been recent developments regarding che Joint
Comprehensive Flan of Action (JCPOA). In view of
such developmenxs, we regret to inform you that
weswirl:not: be.able to continue providing you
with u Nostro account services end ?Mg
­
r-exchange.
•
There is currently nil balance in your EUR, CNH
anc SGD cstro accounts with us and these
accounts will be closed off with effect from 20
Jui 2018.
we thznk yon for your support of DBS Bank Ltd.
Regards
FI Support
g55s ear
-- -----.--------- DAeStC% '['pt!ler
----------
(CK: 7A9ED10SA2B2)
PKI Signature: MC-Equivalent
- 282 -

Apphcatin.
Alliance Message Management
Instance esrct · Detailed Report
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saa_bmjjirth
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Session Holcer
CHN
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3147
Sequence'
Delivery Status:
000%
Instance Type and Transmission
Original
received from SWIFT
Priority :
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Message Utut RRetcrrncc
1232 1808058MJIIRTHANT9972005837
Cr:respondent Input efe:once: 120218080635HRORM'RUAXXX200-05357
Message Header
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Swift Output:
FIN 199 Free Format Message
Seniet:
BSHRCMRUY.XX
EANK'SOHAE SAO.G
RUWI
OM
Receicr ;
BM.IIRTHiNT
SANY AMARKAZ JOMHCUR ISLAM! IRAN {Centrel tank of
INTERNATIONAL DEPARTMENT
TEHRAN IR
E2G: ins7ct±on Re;er+nx;= Bro&r
ACCT CL:SURE
EE.EEL.E-EE
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Zeni you.
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Financial insizuz:on re.
Page 1 %
2
- 283 -

----------.------- Inst±rre Typc ±rd TEar$ix.ssjor -----------­
Origira; received from SIT
Priority
: Wormal
sssage O:put Reference
: 1925 181017MJ11'HAXX:OGG5011511
Correspondent Input Reference
1755 181017BPCPC!GGYX9&37294331
--------------------------- Mc-sage lfeade� --------------------------
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: FIN 2? Free Format Message
send: FCFCRGXX
BANCE DE COMMERCE ET DE PLACEMENTS 5..
ENE CH
BMJI IRTHR&K
BANK ARAZI JGMGUR: IL?HI TAN Central Bank of
cad Office
Tehran IF
MU
: E218101776354
- ------w
sLt±? ; fr --.-----r­
20: Transaction Reference umber
INTL.DIV/&6/RIN
2i: elated Sefererce
CORE. ACCOUNTS
75: Narrative
ATTN: FINA!CI TN?TIT!TIONS TEP:-TENT
DAR COLLEAGUES,
S CD AS A:READY AH!RE, E WIL: CEA55
T&TERMED!ATING ZN LL IRAN ELATE; BUSINESS FROM
:CVEMBER :TH, 2016.
TREE5URE WE KINDLY REMIND YOU T;AT 'RE MR?
ENCOUNTER ITFFCULTIES TN TRANSFERRING REFINING
2ALAN:ES ON YOUR ·ACT
'AT
To roR
CORRESPONDENT ACCOUNTS W:TR ? EANS AFTER
GENER 4T>, 25:2.
WE THANK YOU
ADVANCE FOE PAYING 3TENTION TC
A&CE AND FU? YOIJR RID
DJWDRSANING.
SICEELY YOURS
23QUE DE CO»MF?CE T DE F:CEMENTS SE
INTERN:QNRI. DE=R3TWEDT
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- 284 -

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-----.-------- Instance Type and Transmission -----­
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Priority
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j: 1901 18110SEMJIIRTH2INT001101213
Correspondent Input Refer~nce
1631 181105BPCPCHGGAXXX9646305993
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BANQUE DE COMMERCE ET DE PLACEMENTS S.A.
GENEVA C
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Receiver BMJIIRTHINT
'
BANK MARKAZI JMHOURI
ISL2MI IRAN
{Central Bank of
INTERNATIONAL DEPARTMENT
TEHRAN IR
'
MR E295181105313970
--------------------------- ·Messbge Text---------------------------
j
20: Transaction Referencd Number
· INTL. DI/986/RIN
2l: Related Reference
BO/FS/18/39823
75: Queries
II
·
772: Narrative
[
ATTN: PAYMENT DEPARTMENT
i
WITH REF. TO YOUR MESSIGE ERE
BELOW, PLEASE NOTE TEAT, WE ARE
UNFORTUNATELY NO LONER IN 2
POSITION TO PROCESS BUCH PAYMENTS.
WE HAVE' THEREFORE
CA#CELLED.
YR
'MT202 AND CONSIDER SAME AS NULL
AND VOID.
WITH KIND REGARDS
BCP.- INTL'DEPT
1R; YT' and Date of the Original Msg
202
1813104
9646679494
:20:B0/FS/18/39825
:21:NONE
:32A:161105EUR960081,89
:53A:/10.603289-0-200-EUR-0
BMJIIR'H
:57A:EIHBDEHH
: SPA: KHMIIRTH
--.-+- Messa jrRLef ---t
{CHK: 04E138F05878)
. PKI Signature: MAC-Equivalent
- 285 -

9IC173JIIRTHAYXX00050:1.4772
1410
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1240 1811/EP58£0XX163210194
--------------------------- Massa�c Header-------------------------
Swift Cutt
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KEC. B'AY 'N
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BEN?X MFRKAI FGMHOTZ! ISL»MI I?AN
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WE REGRET G INSR YOU THAT EC BAN NV HAS
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HJ.S ;PLIES, ZMCNGST OTHEF. THINGS, THAT' WE WII5
CLSE YOUR? EU! ACCOUNT XUYDE BE37480915&57253
srrECZ:VE Z5OCT18. AS FROM IHI DATE, WE WILL NO
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THIS TI:F FRAHE WILL ALLOW YO TT CHENGE TO
2MT:ER POWIEE? FR THE FRCCESSING OF PAYMENTS,
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FI-CI±! TEST'ITUTICRNS GROUP
--
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- 286 -

From: Bank of Gansu [maito:gsbank,[email protected]
Sent: Fiday, October 26, 2016 10.21 AM
To: mo afsahizadeh
Cc: H.Dianat; e.shahrami; tigeryuard@yaho.£or; H.Majdi
Subject: Re:Account Dormant
Dear Sir.
;
Ihope this email fnds you well.
Our bank is a'so in a difficult situation now. AN! of our correspondent Banks will ciose our accounts as our bank do business
with Iranian banks. Our bank is mare cautious as November 4 approaches, our bank is working on a solution on all this
matters, snd my col'league informed me that our bank has informed yor good bank via SIFT after August 6th that our
bank will make policy adjustments according to the changes in the situation. Hope to give us an understanding. Thank you.
with best regards
Jenna
• Ban of Gansu
ii
·At 2010-10-25 13:28:51, mc.atsahizadeh" <mo.a![email protected]> wrote:
Dea: Jenna
Hcpe you are doing well.
I reter to the MT 299 with reference Account Dormant' received from your good ban, and wish to inform you that since
we weren't notified by you: side on termination of our CNY account, we intend to transfer the our CNY remaining balance
held with your good bank to CKLBCNBJ belore the 4! Ncvember 2018. Therefore, you are k
i ndly requested to take
appropriate steps to transfer the amounts before freezing our accounts.
with best regards,
Seyed Mohammad Afsahi Zadeh
BACK OFFICE { INTERNATIONAL DEPARTMENT [ SWIFT CODE: BMJIRTHINT
CENTRAL BANK OF ISLAMIC REPUBLIC OF IRAN [ TEHRAN, IRAN
Postal Address: NO.198, Mirdamd Blvd., Tehran, Islamic Republic of tran
P,0.Box: 158754 7\7
3 (T) 009821 29953585 { + (F) 009821 22257229
- 287 -

H.Dianati
Andrea Farovin [[email protected]]
From:
'is.:°
Sent:
,A,' »,±=il
To:
A.Laktabriz
H.Dianati; H.Mzjidi; Andrea Motali; International Corbank
MEETING
Cc:
Subject:
Dear Mrs. Laktabriz,
I would like to thank you very much for your kind welcome extended to me and to my colleague on the occasion of
our visit to your good bank.
As anticipated we are ready to maintain our engagement to deal with Iran while re sizing current operational
activity according to new rules coming out from second raund of USA sanctions who will be in place starting from
next 4" of November.
As discussed we would be ready to receive funds allocation ( through nominated ranian bank maintaining account
with us, like S3man Bank , Middle East Bank, Pasargad Bank )for settlement of pharmaceutical and agri-food
activities.
In case of agreement is mandatory that fund allocation is made before 4" of November because starting from that
day your account with us will be blocked according to the new USA sanctions as explain~ during our meeting
We remain at your entire disposal for any comment on what above
Kind regards
Andrea Farovini
HEAD OF CORRESPONDENT BANKING E SEGRETERIA
Lungo Mallero Cadorna 24
23100 Sondrio (SO)
Banca Popolare di Sondrio
AVVERTEVZE ING,MI·icreta:di qrst& estggt, p:avwiet ds or iwir di poat: elate unedale :±ell: Da@: !pol:re di Seudri yli cseeta}i allepa: ;w·tr"
.ssr rte +bzt. ;v: zgere lie, ta cii syr ale d:;adase ·tr ze lit tessn. or rmmq tmrtswnto mil irttvr nlnewe d'attn, Le de':aw13or,
·i
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·anee streets e cicerts vs to= stsnn vw ci Tei« e. »so»e :{ca« e site bit tee=·
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di rm!rig, ixattnlfhe nei fci nan ai :0% !aren!e z! {ow;te ates di ute' deD&sin l Fsau» Rate t {srarzu- ht Ace R r" <
Pep!se
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T,
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di vrvzaw pets=re ncesz:i nsific;e«at:. c {e modatr, l'
- 288 -

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W:? !E TY! INT> : TR" I TT:DE Z:
: RI:35557 311 ?:3?-5 :717:&:,

- 289 -

- 290 -

Annex 151
Witness statement of Mr M. R. Hoseinzade, Chairman of the Board and Managing
Director, Bank Melli Iran, 1 May 2019

- 291 -

- 292 -

Ferdowsi Ave., Tehran, IRAN
Chairman of the Board
and Managing Director
B. M. I.
I, the undersigned, in my capacity as Chairman of the Board and Managing Director of Bank Melli Iran, with
registered office at Ferdowsi Ave. Tehran Iran, having occupied the position since 28-05-2016, hereby testify
that I have personal and direct knowledge of the facts hereinafter stated except where it is indicated that matters are
based on information or belief, in which case I believe the relevant matters to be true.
1, Bank Melli lran ('Bank Melf") is a governmental commercial bank , with activities identical to that of any other
commercial bank in Iran, whether privately or publicly owned. It has more than 3,000 branches in Iran and
more than 15 branches and subsidiaries in foreign countries.
2.
In the period preceding the 8 May 2018, Bank Melli gradually extended its network of foreign correspondent
banks and started participating in international financing transactions to guarantee international trade and
projects with Iran. Bank Melli also expanded its own network of branches and subsidiaries in foreign
countries and these activities could resume after the lifting of U.S. sanctions.
3 Alter the 8 May 2018, correspondent banks terminated their agreements with Bank Melli and
ceased communicating with Bank Melli, claiming that they could no longer work with us and open bank
accounts in the name of Bank Melli because of US sanctions and the risk of being the subject of these
sanctions. Among the most important banks doing so I can name Societe Generale, La Banque Postale,
RZB and Banque Delubac from France, BCP Bank of Switzerland, Bank Papolare Di Sondrio of Italy,
Danske Bank of Denmark and many others. This has notably had negative impact on Bank Melli assets
held with our former correspondent banks which are now blocked and cannot be transferred back to Iran.
The total amount of Bank Melli's assets frozen in bank accounts held by foreign banking institutions can be
estimated, as of today, at more than 2 million Euros.
4. Bank Melli has issued several bank guarantees on the sole basis of foreign correspondents' irrevocable and
unconditional counter guarantees to secure the undertaken contractual obligations of foreign traders vis-~-vis
Iranian counterparties. There are many cases of non-fulfilment of undertaken liabilities of foreign counter­
guarantors including non-payment of daimed guarantees amounts, outstanding commissions and charges
and delayed interests. For example, BNP Paribas, as the counter-guarantor, has refused to pay Bank Melli
the amounts damed by the Iranian beneficiary for 2 bank guarantees issued by Bank Melli totaling EUR 808k
and therefore, Bank Melli has paid them out of its own resources. Also many counter-guarantors have
ceased unilaterally their correspondent banking relations with Bank Melli under issued counter-guarantees
though falling outside the geographical jurisdiction of sanctions in place. Bank Melli has encountered daims of
several bank guarantees by the Iranian beneficiaries due to failure of foreign applicants in performing their
obligations under relevant contracts. Foreign counter-guarantors' negligence and non-fulfilment of irrevocable
and unconditional liabilities towards Bank Melli have caused many losses and expenses which exceeds the
sum of 1/69 million Euros as of today.
5. Bank Melli is also experiencing severe operating issues with its foreign offices, some of which
are branches of Bank Melli (in Paris, Hamburg or in the Emirates, for instance) while others are domestic
subsidiaries [located in the United Kingdom (London) and in the Russian Federation (Moscow).] These
issues relate to the impossibility of paying local employees or suppliers, to pursue banking relationships
with other banks, etc. This has led all Bank Melli's foreign offices to cease their activities or even nil
operation in units located in the EU, whereas prior to the 8 May 2018, these offices handled a monthly
average of EUR 4/9 billion in banking operations.
This has led to drastic decrease in Bank Mell's profit from international operations, reputation damage and
ever-increasing flee of dients.
- 293 -

Ferdowsi Ae., Tehran, IRAN
Chairman of the Board
and Managing Director
3. M. i.
6. To sum up, the U.S. sanctions have had very negative impacts on Bank Melli activities, the most
important of which have been as follows:
i. Bank Melli is barred from having any relationship with foreign banking Institutions
and has been denied access to the SWIFT communication system;
ii. Bank Melli has seen its assets held abroad with other banking institutions being
blocked because of the refusal of these institutions to issue money transfer to Bank
Melli;
iii. Bank Melli enjoys 3 international financing agreements with Eximbank (South
Korea), Danske Bank (Denmark) and Ober Bank (Austria), but due to US sanctions
against us which has led to a conclusion of banking relationship with these banks,
we have lost the opportunity to utilize them.
iv. Due to failure of foreign applicants in performing their obligations under various
letters of guarantee, Bank Melli has encountered claims from several bank
guarantees by Iranian beneficiaries. Foreign counter-guarantors' negligence and
non-fulfilment of irrevocable and unconditional liabilities toward Bank Melli has led to
creation of much loss and expense for us.
v. Bank Melli is barred from performing its own obligations with foreign counterparties
including but not limited to repayment of loan installments since it cannot
transfer any fund abroad and its assets abroad are being frozen;
vi. Both Bank Melli's branches and subsidiaries abroad are barred from conducting any
business operation and money transfer even for paying salaries of their own
employees.
7. As of today, Bank Melli no tonger has any significant operation in international markets or
with non-Iranian counterparties, whatever the type or the subject-matter of the operation. Notably,
the rendering of the 3 Of October Order by the International Court of Justice has not resulted in any
resumption of international exchanges of Bank Melli even in the fields that are covered by this Order.
y,
=
w..}
Mohammad Reza Hoseinzade

- 294 -

Annex 152
Witness statement of Dr S. J. Mirghassemi, Director of Legal Affairs, and Mr A.
Esmaeilipour, Director of Marine Department, Central Insurance of IR Iran, 1 May
2019

- 295 -

- 296 -

()
BIMEH MARKAIi
CENTRAL INSURANCE OF iR IRAN
I. Dr. Seyed J avad Mirghassemi, as a permanent employee in Bimeh Markazi Iran
(Central Insurance of IR Iran) since 2011. His official designation is General Director
of Legal Department.
2. Ali Esmaeilipour, as a permanent employee in Bimeh Markazi Iran (Central
Insurance of JR Iran) since I 991. His official designation is General Director of
Marine & Aviation Reinsurance.
Testify that we have personal and direct knowledge of the facts hereinafter stated
except where it is indicated that matters are based on information of belief, in which
case we believe the relevant matters to be true:
Bimeh Markazi Iran (Central Insurance of IR Iran) was founded in 1971 (1350) by the
Act of Iranian parliament for the purpose of regulating, expanding, guiding insurance
operations in Iran, and for the guidance of the insurance companies, along with the
protection of the insured and their beneficiaries as well as to ensure government
supervision of such operations.
In Parallel with regulatory and supervisory missions, Bimeh Markazi has been
entrusted to accomplish local compulsory reinsurance and to conduct inward and
outward reinsurance business in both national and international markets, consistent
with its Establishment Act, it will continue to operate the following duties;
• To prepare by-laws and regulations, to issue directives deemed necessary for
the promotion and proper execution of insurance operation in Iran, with due
regard to the text of this law
• To compile necessary information on the performance of all insurance
organizations operating in Iran
• To effect facultative reinsurance from Iranian and foreign insurance.
organization
• To cede reinsurance to Iranian and foreign related companies whenever deemed
necessary
• To guide, lead, and supervise insurance companies, to afford protection to such
companies in view of ensuring sound insurance market, to regulate matters
relating to agencies and brokers, to supervise reinsurance matters to prevent
unfair, deceitful and unsound competition, to regulate and supervise insurance
industry.
- 297 -

(e)
BIMEH MARK AZ
CENTRAL NSURANCK OF R IRAN
Under the Iranian compulsory reinsurance regulations, all insurance companies
operating in Iran are obliged to cede certain percentage of their direct life and non­
life business to Bimeh Markazi.
Also, if and when, insurance companies intend to acquire reinsurance coverage
from abroad they must offer certain percentage of each reinsurance contract to
Bimeh Markazi under the same tenns and conditions.
Bimeh Markazi endeavors to use local reinsurance capacity by retro ceding all or
part of compulsory reinsurance to local insurance companies according to their
capacity, after which contribution from international markets is welcomed.
2. One of the Central Insurance of Iran roles is to provide insurance companies
operating in Iran with reinsurance, a mechanism by which an insurance can, and in
some cases must, transfer to Central Insurance of Iran or another reinsurer the part
of the risk they provide insurance which excesses their financial capabilities to face
the said risk- i.e., to pay the claims following the realization of the risk. Before the
8 May 2018, the Central Insurance of Iran would then, in tum, transfer its "excess
risk"- on average 20 to 30% of its own reinsurance risk, (387,657,728 Euro) to the
major foreign reinsurance companies on the international markets.
3. As from January 2016, Central Insurance of Iran had resumed its business
relationships with the main actors of the international reinsurance market. Up until
May 2018, it has been dealing with all the major reinsurance companies- Munich
Re, Swiss Re, Partner Re, Score Re, General Insurance Company of India except
the US ones on a business which global amount has continuously grown. It is
estimated that the risks reinsured by Central Insurance of Iran on the international
markets have grown between the Iranian calendar year 1395-20 March 2016-20
March 2017- and the Iranian calendar year 1396-21 March 2017-20 March 2018 ­
amounts to 20%. During this period, Central Insurance of Iran transferred 20% to
30% of its reinsurance risk to international reinsurance companies.
4. At the same time, and consequently to the recovery of these international
reinsurance opportunities, Central Insurance of Iran has started promising
negotiations with foreign investors on high-risk projects- requiring strong
insurance and reinsurance capacities and, therefore, an access to international
reinsurance- to be carried out in Iran notably in the energy sector.
5. However, since May 2018, all the reputable international reinsurance companies
have stopped negotiations or terminated their reinsurance agreements with
Central Insurance of Iran due to the US sanctions.
6. Some of these major players justified their decision to terminate their
agreements with Central Insurance oflran considering because they had minority
2
- 298 -

(e
BtMEH MARK AIi
£NTRAL INSURANte 0FR RAN
U.S shareholders. For instance, General Insurance Company in India which was
one of the major contracting parties before 8 May 2018, terminated its agreement
with the Central Insurance of Iran.
7. As a result of this massive and complete ending of reinsuring agreements,
Central Insurance of Iran must now bear alone all the risks resulting from its
reinsurance activities for the insurance companies operating on the local market.
This burden is all the heavier since Central Insurance of Iran is obliged, under
Iranian law, to provide such reinsurance services to the local insurers.
8. Central Insurance of Iran does not have the financial capacity to fully cover this
risk it is reinsuring without any international backup. It could therefore face a
liquidity issue if severe events it is reinsuring occurred. It is now extremely
vulnerable, as the Iranian insurance sector as a whole, to a risk of systemic failure.
9. This situation, well known to foreign investors, their withdrawal from the
projects they were planning in Iran, including large infrastructure projects in the
energy sector.
10. Moreover, it has become, since May 2018, impossible for Central Insurance of
Iran to receive funds from European (re)insurance companies: Central Insurance of
Iran is expecting in vain payments from foreign (re)insurers under (re)insurance
agreements. Yet for fear of the US sanctions on the banking and insurance sectors,
the banks of these European companies refuse to process such payments.
Conversely, Central Insurance oflran cannot find foreign banks willing to execute
its payments of (re)insurance claims by foreign counterparts, though it is
financially able to meet these claims. Most of the banking routes that Central
Insurance of Iran used to rely on are now closed.
11. This impossibility to proceed payments through international banking system,
along with the US sanctions against the Iranian insurance sector themselves, has
also caused Central Insurance of Iran to be sidetracked from all the major
Insurance organizations and pools of insurers to which it is a member. For instance,
following the re-imposition of the US sanctions, the aviation pool of the Federation
of Afro-Asian Insurers and Re-insurers (FAIR) changed the status of Iran from
"full member" to observer of this pool.
The international Motor Insurance Card System (known as Green Card System) is
designed to cater for the separate interests of traveling motorists and the party
victims of such motorists in visited countries, through reciprocal cooperation of
members under a uniform agreement between bureaus. It came into operation in
1953. Iran has been a member since 1978 and is represented by Bimeh Markazi
that administers the Iranian bureau.
3
- 299 -

BIMEH MARKAIi
CENTRAL INSURANCE Or R t@AN
We are now involved in many problems due to the sanction against Iranian banks
which do not allow the green card bureau of Iran transfer the money requested by
other green card members.
12. As regards the Iranian insurance sector itself, the following remarks can be
made regarding the situation as from May 2018:
i. All the significant foreign (re)insurance companies, i.e. those having an
international reputation, have left the Iranian market.
The only foreign (re)insurance companies which continue operating in this
market are very low in the international (re)insurance rankings, or not ranked at
all.
ii. The transfer of funds to Iranian insurance companies from abroad, in order to
execute payment of claims or to receive premiums, is practically impossible due
to refusal of the foreign banks concerned to proceed to such transfers. The
international banking system is blocked as regards Iranian insurance companies,
and as a result, impedes their activities.
111. The domestic insurance sector as a whole is in economic distress: the solvency
margin, i.e. the financial reserve over and above the amount strictly necessary
to meet underwriting liabilities, of most of the 'Iranian insurance companies has
been sharply decreasing, leaving them overexposed to the risk of default upon
request of large claims. Many small size insurance companies have gone
bankrupt following huge losses.
iv. All the rating agencies- including Moody's, Fitch, etc.-having ceased any rating
of the Iranian insurance sector.
Dr. Seyed Javad Mirghassemi
Ali Esmaeilipour
Director o� Legal Affairs
��D
Director of Marine Department
{@?]
7
k.'a~
f
PIMEH A!RKAZI
"ENTRAL INSUR»KNCE OF IR IRAN
T' (
P}MEH MAR!KAZI
1y 2619
4
•
- 300 -

mkazemi
From:
Sent:
To:
Cc:
Subject:
Tristan O'Brien ([email protected]) [[email protected]]
Monday, September 24, 2018 4.37 PM
majid kazemi
'hassan motesharrei'; [email protected]; 'Ahadi'; [email protected]; Mohamed Kolb;
Chems Eddine Kassali; Saeed Djalilvand; Kenrick Aldrich
RE: Bimeh Markazi Iran,Bimeh Iran, Bimeh Asia,Bimeh Aborz & Bimeh Dana- Fire
Engineering , CIS & LOP CATASTROPHE XL Programme 1397/98(2018/2019)
Dear Mr Kazemi,
further to our previous correspondence and after much deliberation by our Board of Directors, we regret to
advise that due the insurmountable difficulties we are facing with the banking system, for the present time
UI8 has no choice but to withdraw from the intermediation of Iranian business. We cannot in good faith be
effective reinsurance brokers when we cannot present accounts, claims, premiums for our clients.
Ta this end we are prepared, if you so wish, to provide you with information regarding the reinsurance
companies, underwriters an contact details of each reinsurer that support your programme so that you may
converse with them directly regarding the renewal of their shares far 2018/19 underwriting year.
l am sorry to bring you such news, but can only tell you that we at UIB are equally very frustrated by this
position.
With kindest regards, Tristan
Tristan G'Erier
ccu: Executive - Treaty Division
r.'es insurance Brokers Lti
Direct tine: 44 {020 7336 1622 ; Switcnkoard: +44; (0)20 742$ 0551 • Mabiie: +44 (07500 446 274 {
Facsimile: +44 120 7480) 5162 ' Wet: ww uibgroup_com
U1B
Please ensure you are aware of your responsibilities under the Insurance Act 2015. Click_here for our factshcet.
From: Tristan O'Brien
Sent: I9 September 2018 15:34
To:
'majid kazemi' <[email protected]>
Ce: hassan motesharrci' <[email protected]>; [email protected]; 'Abadi'
<[email protected]>; [email protected]; Mohamed Kotb <[email protected]>; Chems Eddine
Kassali <[email protected]>; Saeed Djalilvand <[email protected]>
Subject: RE: Bimeh Markazi Iran.Bimeh ran,Bimeh Asia,Bimeh Alborz & Bimeh Dana- Fire . Engineering.
CIS & LOP CATASTROPHE XL Programme 1397/9802018/2019)
Dear Mr Kazemi,
' can confirm your point below. In the case of agreeing on direct payment the placement of the reinsurance, alt
correspondence, the issuance of supporting documentation, claims advices and recovery processes will still be
1
- 301 -

~'oteshearei
4. 2i:rot1a1+AFG 2ch
trap4ewe Zerrrerr.rCTSiO#er,VSEE'AD7771Yr.rir.weer
From
evi Pamarsbhen (revip@;tremail.com} <ravip@jbbodarail.<am>
Sent.
Monday, September 24, 2018 10.00 A1M
To.
hassen moteshane.
'majid kazemi'; a.ahaGi@centinsu:.ir. [email protected], mosazadeh@centwns: st
[email protected]; 'J 6 Boda Reinsurance Brokers Pt Ltd'; Jagannath Snettar,
Bode Reinsurance Brokers Pt Li'; 'EB EOD REINSURANCE BROKERS PV LTD· 'AD
Boda': 'Bod3.Gautam': 'Rohit Boda'; 'JEE MUMBAI - DEEPAX SHAH';
dilip.pa:[email protected]
Subject
ran Business
In the context of the ongoing & re-imposed sanctions on lrar, we at). B, Boda have concern in offering our services tc
the Iranian Markets.
°
'ith a grief heart, we as a company are left with no aption but compelled to refrain from offering our services to tne
ran market with immediate effect until the relaxation in sanctions.
We request for your kind undrrstanding.
·'rth Ees: egars,
0j3s.Mzmndar
I.Padrnznabhan (Pevi}
Principaf office: & Sr.Execttve Oirectar Seror Executive Dector
1.8.Boda Reinsurance Brokers Pvt.Ltd.
Maker Bhavan I, Sir VWthalds Thacxerscy Mar;
New Marine Lines, Churchmar
L. +. 09A
Murtzl 40020, Ind'e
Years
8oard
+512265314949 €tr.984
Direct
+9;226631498
Mobic
+919832061797%
d
E
- 302 -

M-Adept
From:
Sent:
[email protected]
=.·.Y.',' ,l,sail
To:
Cc:
Subject:
[email protected]
[email protected]
FW: TERMINATION WITH THE CLUBS OF 'SKULD' AND "WEST OF ENGLAND'
Notice IRISL 29 June 2018.pf
Attachments:
Dear MS Nori
Good day
Ref our Telcon. PIs find herewith attached termination letter.
Best Regards
Managing Director
Qeshm International Trust Alliance (QITA) P& Club
6th floor, No. 523, ASeman Tower, Shahid Lavasani
(Farmanieh} Junction, Pasdaran Ave., Tehran/Iran
Postal Code: 1957617341
Tel: +98 21 261000·
Direct Tel.: +98 21 2384 63°
Mobile : +98-912 1777159
Fax:
+98212...A
en\i' _"T-
web:
.-.. 2.it.: '.. -­
Disclaimer: This message [and any attachments]) is confidential to the intended recipient and may be privileged.
f you are not the intended recipient you should contact us and must not make any use of it.
Sent: 5aturday, October 06, 2018 17:44
To: 'md'
Subject: TERMINATIDN WITH THE CLUBS OF 'SKULD' AND 'WEST OF ENGLAND'
TO: 'QITA P&l'
K/ATTN: MD-- CAPT.B.ROSHANI
DATE: 06.10.2018
SUBJECT: TERMINATION WITH THE CLUBS OF 'SKULD' AND 'WEST OF ENGLAND'
DEAR SIRS,
GDOD DAY
- 303 -

FURTHER AND W/REF TO OUR PLEASANT TEL. CONVERSATION OF A WHILE AGO REGARDING THE SUBJECT, PLEASE
NDTE THE FOLLOWING QUOTED MESSAGE WHICH HAS BEEN RECEIVED FRDM THE CLUB
IN RESPECT OF TERMINATION / CANCELLATIDN WITH THE CLUB DF "WEST DF ENGLAND" AND FIND ATTACHED
HEREWITH THE LETTER REGARDING CANCELLATION / TERMINATION DF THE CDVERAGE WITH
THE CLUB OF "SKULD" FOR YOUR KIND ATTENTION AND NEEDFUL WITH THANKS:
BEST REGARDS
CAPT.H.AKBARI KHABAZ
INSURANCE & CLAIMS OFFICE
TEL: +98 21 23843625
FAX: +98 21 26100012
PLEASE REPLY TD. E Sais es - ·
WITH A COPY TD: .is@m:cna.0n:
2
- 304 -

-- SKULD
Assuranceforemngen SKULD
(Gjensud1g
PO.Box 1376 Vika
NO-0114 Oslo, Noway
Visiting address
Radhusgaten 27, 0158 Cslo
el +47 22 00 2200
Fax. +47 22 42 42 22
E.man
[email protected]
Regustered No
938 419 531
wwwskultd.com
29 June 2018
To; Islamic Republic of Iran Shipping Lines Holding
No. 37 Asseman Tower
Shahid Lavasani (Farmaneh) Junction
Pasdaran Ave
Tehran
ran
CIO P.L. FERRAR!& Co Sr!
Via San Bartolomeo degli Armeni, 5
16122 Genoa
taly
For the attention of Filippo Fabbri
Dear Sirs
Notice of Termination
We refer to the various discussions we have had with you ending with the message from our
President & CEO Mr. St~le Hansen on 27 June 2018 regarding withdrawal of the US from
JCPOA and consequences it has for the entries of IRISL vessels with us.
We hereby advise you that we terminate the entry of the below-listed vessels under the policies
in the Association on thirty days notice pursuant to Skuld Rule 3.3.2 d):
IO Nr.
Vessel Name
9305192
AMINA
9193197
AN DIA
9465863
AROAVAN
9369722
ARIES
9226944
ARTARIA
9193214
ARTAVAND
930$221
ARTIN
9405930
ARTMAN
9193202
ARVIN
9465746
AVANG
9405954
BAHJAT
9405942
BASKAR
9465760
BATIS
9387798
BAVAND
PE #GEN
--1E_
+.GKO
_CNDCN
'5
PAE5
S%#+Ri
- 305 -

�
Page 2
w SKULD
9405978
BEHDOKHT
9369710
DARYABAR
9387803
DELNAVAZ
9305207
DELRUBA
9165827
ELYANA
9305219
GANI
9323833
GOLAFRUZ
9193185
GO!SAR
9226956
HAMGAM
9167291
JAIRAN
9465758
KiAZAND
9213387
MAHNAM
9274941
MIAMI PRIDE
9387815
OURA
9465851
PARISAN
9167265
PARNIA
9405966
ROSHAK
9465849
WA RTA
The thirty day notice period commences from today's date with the last day of entry for all
vessels under all policies with the Association being 29 July 2018.
Please acknowledge receipt of this message and confirm that it has been brought to the
attention of the members
On bena(Gr ssuranceforeningen Skuld (Gjensidig)
/L-
•
Vice President, Underwriting
-
- �
- 306 -

Mr. Hassan Motesharrei
Vice President ei the Central insurance
of the IR, c! #ra:
wearesday, 18 July 2016
Re:Jrasnsating Reinsurance Busingss in lrar
[ea; #:. iotesherc
i vase furtner to the discussions we have he over the last several rantns
SCOR Gioba! P&C has been proud to conduct einsurance business in the Islamic Republs ct
Iran (\an") for many years ant, during tha! tmne, has developed many strong and value
business partnerships with Iranian clients, including our business partnership with Eumnei
Mark.azi
Pornpt;y following an's agreement of the Joint Comprehensive Plan of Action (JC0A} with
the five permanent members of the United Nations Security Council. Germany and the
Eapean Urion. SCOR moved to put in place tne infrastructure an arrangements require tc
able :!s reinsurance business and relationships in lran to be resume'.
S·nze re-entering the !ranian Market threz egnficant developments n?we taken plc€
s you ere avware iror pnor iscussions. SCO7's banking pen;er for \re:ian business
i esche Ben.. unexpectedly and unaterally advised &CO
it would no longer process
·»eymens io and from Ian - effectively preventing SCOR recerving agreed premiums
an¢ making required claim payments. Despite a lengthy en diligent effort to identify
an contract with an alternative, appropriatoly creGentialed bank with a European
footprint able to deal with payments to and from Iran, SCO has been unable to identfy
an appropriate banking partner.
On May 8, 2018, the United States withdrew" from the JCPOA and its waiver of its so
called secondary sanctions" was not renewed, such that its "secondary sanctions'
snapped beck and (so fer as the United States is cancemed) operate to prevent nor-US
Parsons from conducting, amongst other things, (re)insurance business in ran
The Unite States' 'withdrawal from the JC0! end the snap back of its 'secondary
sanctions" are expected to turther inhibit SCOR's efforts to identify and to contract vwth
a crib'e banking partner -- if nat to render the effor! futile.
Despite discussions having been mitate at the hg'est dipiomatic levets betweer
France and the United States, last week SCOi became aware the! the Unrted States
has declined to agree waivers/licenses to exclude French companies from its application
oi its "secondary sanctions' regime (similar discussions between other European
governments and the United States have been similarly unproductive)
+ •
t, 5447¢ 13, +334,' 541 85 (£-we oxrr
•• a: 4 £; {433$ 3!+1 Sy: 5&2 0? 3? {&!
.st±£ ·phnu au tart2! +; 51&93 05% 9S es
- 307 -

Grven these three significant developments, as
previously disc
ssed SCOR has determine@
5COiR will continue to monitor the commercial and political situation and will react
according;
Yours sincerely,
- 308 -
u
that it can no longer continue to transact (re)insurance business in en an that it should air
wind-down its iranian operations and business partnerships. Consequently, current business
vwitt not be renewed, an tonger-term contrac!s are ta be terminate@
t hes been SCOR's and my personal pleasure and honor to have conducted business wt wt
end SCOR end! look forward to the opportunity to renew our
! wish you ano Bireh Mzrkazi continued business success.
business
partnership in the {utire
(
Hedi Hachiche
&C Treaty CUO. Head Midte East & Atria
Coy Victpr Pe:gnet, Chief Executve Oiicer, SCOR Global F&C
'+
-33ny14! 7&1.F5»
·312(0: 52 4¢ 83 0.
vu.sc con
»'2.5&2022?-Sse:G3; €332531 00£45
'sci? f::ccgne s racla • 1 51 E54 05; 9 e5,

Motesharei
From:
Sent:
To:
Cc:
Subject:
Antoine Gomot ([email protected]) <[email protected]>
Friday, August 03, 2018 8.19 PM
'[email protected]'
Salvatore Orlando
RE: PartnerRe communication - Iranian Business > Iranian Pool Per Risk XOL and Iranian
Pool Cat X0L 2017/2018
Dear Mr Motesharrci,
Further to our previous correspondence below regarding our position in respect of the re-imposition of sanctions
that were lifted or waived in connection with the JCPOA (Joint Comprehensive Plan of Action), as announced
by the US on May 8, 2018.
We hereby notify you that the following businesses arc unfortunately impacted by this change.
• Catastrophe Excess of loss Reinsurance treaty entered into Bimeh Markazi Iran, Bimeh Iran, Bimeh Asia,
Bimeh Albornz and Blmeh Dana with Partner Reinsurance Europe SE French branch terminating on 22
September 2018 inclusive ("Contract Terminatlon Date"). Hereafter, "the Contract".
• Per Risk Excess of loss Reinsurance treaty entered into Bimeh Markazi lran, Bimeh Iran, Bimeh Asia, Bimeh
Albonz and Blmeh Dana, Bimeh Parsian, Bimeh Mella! & Bimeh Saman with Partner Reinsurance Europe SE
French branch terminating on 22 September 2018 inclusive ("Contract Termination Date"). Hereafter, "the
Contract".
As a result:
Effective August 6, 2018, we will no longer be in a position to provide (re)insurance coverage for any
risks/activity types to which sanctions will be re-imposed from this date (please refer to the [ran sanctions page
of the OFAC website and in particular the FAQ for the defined activity types). PartnerRe's (re)insurance coverage
of these particular risks/activity types, if any, will be cancelled as of August 6, 2018.
We would like to assure you that we will do our utmost to continue to honor our contractual obligations
regarding (i) risks concerned by, but occurring prior to, that date and (ii) risks which are not targeted by that
date until the Contract Termination Date, in accordance with the terms of the sanctions clause and the sanctions
regulations that apply to PartnerRe. It may be that third parties, for example banks, prevent us from honoring
our obligations. We must point out that PartnerRe shall not be held responsible for the actions of third parties
which are beyond our control.
We would be grateful if you could acknowledge receipt by reply to this email.
With my best personal regards.
Antoine Gomot
Treaty Manager
P&C Middle East & Africa
Partner Reinsurance Europe SE
Succursale Francaise
153 rue de Courcelles, 75817 Paris Cedex 17, France
- 309 -

mkazemi
From:
Sent:
To:
Cc:
Jean Wakim ([email protected]) [[email protected]]
Tuesday, September 18, 2018 12:01 AM
majjd kazemi; Hasan Fawaz
'hassan motesharrel'; [email protected];
'Ahad?'; n [email protected]; Habib Jaalouk;
Subject:
Habib Jaalouk; Alain Bouzaid
Bimeh Markhazi lran,Bimeh Iran,Bimeh Asia.Bimeh Alborz, Bimeh Dana, Bimeh Parsian,
Bimeh Me'lat & Bimen Saman - Fire , Engineering, CIS & LOP Risk XL Programme 1397/98
(2018/2019 )
Dear Majid,
hope you are well,
We deeply apologize for our late response.
Our delay was unintentional and due to the ambiguous environment the unfortunate new set of sanctions will
have on the Insurance and Reinsurance market. We have tried our best to find decent reinsurance capacities to
continue our long term engagement with your esteemed company but in vain. Our security list does not allow us
ta work with certain reinsurers for the main reason that we do not have enough evidence that they will honor
their commitments.
Given the lack of decent reinsurance capacities and the inability to find banking channels in the near future to
honor the financial transactions. We deeply regret being unable to continue with the placement of our order on
both the Risk and Cat XL Programs.
We once again regret this unfortunate outcome and wish that al! these obstacles shall soon be waived and
aiming for a brighter future.
We remain at your disposal in providiug any types of consultancy and knowledge sharing.
Kind Regards.
Jean
Jean Wakim
Treaty Division
Chedid & Associates S.A.L.
Chedid Re House, Presidential Palace Avenue, Baabda
P.O.Box 16-6515, Beirut, Lebanon
T +961 5956080 ex. 316. M +961 79 300323
chedidre.com
A company of Chedid Capital

- 310 -

Annex 153
IMF, “Belgium - Financial System Stability Assessment”, IMF Country Report No.
18-67, 6 March 2018
Excerpts: p. 1, pp. 10-11

- 311 -

- 312 -

INTERNATIONAL MONETARY FUND
IMF Country Report No. 18/67
BELGIUM
FINANCIAL SYSTEM STABILITY ASSESSMENT
March 6, 2018
This Financial System Stability Assessment paper on Belgium was prepared by a staff
team of the International Monetary Fund as background documentation for the periodic
consultation with Belgium. It is based on the information available at the time it was
completed on November 21, 2018.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 Fax: (202) 623-7201
E-mail: [email protected] Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
© 2018 International Monetary Fund
- 313 -

BELGIUM
instruments; some insurance companies have also purchased mortgages. While these changes have
reduced the sector's exposure to interest rate and market risks, they increase its exposure to
liquidity risk. Further, the low quality of some insurers' capital raises concerns.
9.
Belgian insurers have large holdings of domestic sovereign bonds and real estate.
Sovereign bonds account for nearly half of total assets of insurance companies and around two
thirds of these are Belgian sovereign bonds. Real estate exposures are also high and come mainly in
the form of mortgage loans issued in the Belgian and Dutch market. Additionally, being part of a
financial conglomerate (FC), some insurers have concentrated exposures towards banks, particularly
in the form of deposits within the same group.
10. The shadow banking and asset management sectors are relatively small. The assets of
shadow banks, defined as entities fully or partially outside the regular banking system that perform
credit intermediation, amounted to 30 percent of GDP (about one-tenth of the banking sector) at
end 2016. The sector is dominated by investment funds, including money market and non-equity
investment funds, and includes also leasing and factoring companies, lenders outside banking and
insurance groups that provide consumer and mortgage credit, and securitization activities not
retained on the balance sheets of banks. Belgian investment funds overall, including those that are
not part of the shadow banking sector, had assets equivalent to 35 percent of GDP at end-2016.
11. However, shadow banks and investment funds pose some risks to financial stability.
Risks from direct exposures (including within FCs or consolidated banking and insurance groups) are
relatively small: only 7 percent of banks' funding comes from the shadow banks and banks' claims
on the shadow banking sector are also about 7 percent of their assets. The exposure of insurance
companies and pension funds is somewhat higher at about 17 percent of their total assets. However,
banks may be indirectly affected by falls in asset prices and tightening liquidity in the event of fire
sales by fund managers facing investor redemptions. Risks also stem from the interconnectedness
between investment funds and banks that sponsor them, as banks may provide support to funds
experiencing stress even in the absence of a contractual obligation.
12. Captive financial institutions (CFls) hold sizeable assets but have virtually no direct
links with the domestic financial system. CFls (e.g., nonfinancial holding companies, corporate
treasury centers) are typically established by international companies seeking to benefit from tax
advantages in Belgium. Their liabilities (comprising debt and equity) amounted to 105 percent of
GDP in 2016 but their transactions are mostly with other entities within the same corporate group
and are not intermediated by financial firms. CFIs hold only €6 billion (about 1.5 percent of GDP) in
cash and deposits at Belgian banks, and Belgian banks have less than €5 billion in claims on CFls.
Nevertheless, given the magnitude and growing size of CFI debt, continued monitoring is warranted.
13. Belgium is home to SWIFT, a critical service provider (CSP) for FM ls across the world.
Many systemically important FM ls, their participants, and correspondent banks are dependent on
SWIFT's core financial messaging services. At end -September 2017, 239 market infrastructures were
using SWIFT. Around 11,000 institutions across 200 countries and territories are connected to SWIFT.
SWIFT messaging services support domestic and international payments and facilitate the
settlement of payments and securities transactions, including in central banks' monetary operations.
10
INTERNATIONAL MONETARY FUND
- 314 -

BELGIUM
Belgium, as a financial center, and the NBB as the authority in charge of its oversight, face
reputational risk in case of an incident (including a cybersecurity incident) impacting SWIFT's core
services. NBB has recognized SWIFT as a critical infrastructure under the 2011 Law on the Protection
and Security of Critical Infrastructures, which subjects SWIFT to additional requirements for security
planning.
14. Recommendations by the High-Level Expert Group (HLEG) on the Future of the
Belgian Financial Sector are being implemented. The HLEG, established in 2015, issued the
following year a report with 10 recommendations to enhance the resilience and competitiveness of
the financial sector. Working groups have been established in five areas: (i) financing the real
economy; (ii) regulation and supervision; (iii) digitalization and cyber risk; (iv) growth finance; and (v)
promoting Brussels as a financial center. A"B-hive" comprising banks, insurers, and the government
was created to attract investment in the digitalization of the financial sector. A Financial
Cybersecurity Council, with representatives from financial institutions, cybersecurity agencies, and
supervisors, is developing proposals to strengthen Belgium's cyber resilience.
-
SYSTEMIC RISK AND RESILIENCE
15. Stress tests were conducted to assess the financial system's ability to withstand losses
and continue supporting the real economy. One set of tests used macroeconomic scenarios to
capture the impact of a drastic deterioration in macrofinancial conditions on the solvency of banks
and insurance companies. A second batch of tests, conducted only on banks, measured the impact
of hypothetical deteriorations in liquidity and asset market conditions on individual entities and on
the likelihood of contagion. The technical details of the tests are described in Appendices II and Ill.
A. Scenario-Based Solvency Analysis
16. An adverse scenario was calibrated in coordination with the NBB. The adverse scenario,
spanning five years, covered the first three risks identified in the RAM (heightened global risk
aversion, correction of housing prices, and increased sovereign risk) and featured nine quarters of
negative growth. The severity of this scenario is comparable to that in the 2016 EU-wide stress tests;
however, the scenario envisages a more drastic correction of asset prices, largely motivated by the
continuation of buoyant financial conditions in 2016-17. The fourth risk in the RAM, a low-for-long
scenario, was assessed using single-factor shocks. The baseline was aligned with the October 2017
World Economic Outlook (WEO). In all cases, the projections included variables for Belgium, ten
relevant foreign countries, and global financial conditions. The tests covered the six largest Belgian
banks (90 percent of the system) and used ECB/SSM confidential supervisory data post-2014 and
NBB supervisory data pre-2014. The tests were based on end-2016 data.
Banks
17.
In the baseline, capital ratios decline slightly because of the implementation of Basel
Ill deductions and projected balance sheet expansion. Aggregate common equity tier 1 (CET1)
ratios, adjusted to exclude instruments ineligible under Basel Ill, range between 15.1 and 15.5
percent initially, peak at 15.6 percent in 2018, and stabilize at around 15 percent by 2021. These
INTERNATIONAL MONETARY FUND 11
- 315 -

- 316 -

Annex 154
French Senator P. Bonnecarrère, “Rapport d’information fait au nom de la
commission des affaires européennes sur l’extraterritorialité des sanctions
américaines”, French Senate, 4 October 2018
Excerpts: p. 1, p. 23

- 317 -

- 318 -

N° 17
S~NAT
SESSION ORDINAIRE DE 2018-2019
Enregistr~ ~ la Pr~sidence du S~nat le 4 octobre 2018
RAPPORT D'INFORMATION
FAIT
au nom de la commission des affaires europ~ennes (I) sur l'extraterritorialit~
des sanctions am~ricaines,
Par M. Philippe BONNECARRE~RE,
S~nateur
(I) Cette commission est compos~e de : M. Jean Bizet, pr~sident ; MM. Philippe Bonnecarr~re, Andr~ Gattolin,
Mmes V~ronique Guillotin, Fabienne Keller, M. Didier Marie, Mme Colette M~lot, MM. Pierre Ouzoulias, Cyril Pellevat, Andr~
Reichardt, Simon Sutour, vice-pr~sidents ; M. Benoit Hur~, Mme Gis~le Jourda, MM. Pierre M~devielle, Jean-Francois Rapin,
secr~taires ; MM. Pascal Allizard, Jacques Bigot, Yannick Botrel, Pierre Cuypers, Ren~ Danesi, Mme Nicole Duranton,
M. Christophe-Andre Frassa, Mme Jo~lle Garriaud-Maylam, M. Daniel Gremillet, Mme Pascale Gruny, Laurence Harribey,
MM. Claude Haut, Olivier Henno, Mmes Sophie Joissains, Claudine Kauffmann, MM. Guy-Dominique Kennel, Claude Kem,
Pierre Laurent, Jean-Yves Leconte, Jean-Pierre Leleux, Mme Anne-Catherine Loisier, MM. Franck Menonville, Georges Patient,
Michel Raison, Claude Raynal, Mme Sylvie Robert.
- 319 -

- 23­
D. CR~ER DES CANAUX FINANCIERS S~CURIS~S
1. La menace d'une d~connexion de SWIFT de la Banque centrale
d'Iran et des banques iraniennes et la n~gociation d'une
exemption « humanitaire »
SWIFT assure depuis 1973
le fonctionnement d'un r~seau
international de communication ~lectronique entre acteurs des march~s, qui
garantit la rapidit~,
la s~curit~,
la confidentialit~ et l'inviolabilit~ des
~changes relatifs aux op~rations financieres (ordres d'achat et de vente,
confirmations d'ex~cutions de
transactions,
instructions de
reglement-livraison, ordres de paiement...). Il est devenu un ~l~ment cl~ des
~changes internationaux. La plupart des banques et nombre d'acteurs non
bancaires en sont adh~rents et ce r~seau et ces messages sont des standards
au point que d'autres infrastructures de place publiques ou priv~es
(TARGET2, Euroclear ou Clearstream) s'appuient sur eux.
Le Tr~sor am~ricain pourrait confirmer le 4 novembre qu'il demande
~ SWIFT de d~connecter de son r~seau la Banque centrale d'Iran et les
banques iraniennes, ce qui
les emp~chera de continuer leurs ~changes
s~curis~s avec les op~rateurs europ~ens. Or, la pr~sence de deux banques
am~ricaines au conseil d'administration de cette soci~t~ priv~e ~tablie en
Belgique, la menace de gel des avoirs aux Etats-Unis ou d'interdiction
d'entr~e sur le territoire am~ricain ~ l'encontre de ses dirigeants constituent
un puissant levier depression.
II faudrait a tout le moins obtenir de I'OFAC, au titre des exemptions
dites « humanitaires », qu'une banque iranienne puisse rester connect~e au
systeme afin de poursuivre l'exportation de biens non frappes par des
sanctions comme
les produits pharmaceutiques, agricoles ou
agroalimentaires, ce qui permettrait ~ SWIFT de b~n~ficier d'une garantie
d'immunit~ pour ces op~rations.
Sur cette question du « canal humanitaire », on notera par ailleurs
que, le 3 octobre 2018, la Cour internationale de justice, saisie par l'Iran sur
la base de violations all~gu~es du trait~ bilat~ral d'amiti~ de 1955 entre I'Iran
et les Etats-Unis, avec l'~diction par ces derniers, le 8 mai 2018, des sanctions
~conomiques, a rendu une ordonnance indiquant que « les Etats-Unis
d'Am~rique, conform~ment ~ leurs obligations au titre du trait~ d'amiti~, (...)
doivent, (...) supprimer toute entrave que les mesures annonc~es le 8 mai 2018
mettent ~ la libre exportation vers le territoire de la R~publique islamique d'Iran
i) de medicaments et de mat~riel m~dical ; ii) de denr~es alimentaires et de produits
agricoles ; et iii) des pi~ces d~tach~es, des ~quipements et des services connexes
(notamment le service apr~s-vente, l'entretien, les r~parations et les inspections)
Society for Worldwide Interbank Financial Telecommunication.

- 320 -

Annex 155
OberBank, “Business policy measures regarding Iran business”, 2 January 2019

- 321 -

- 322 -

Business policy measures regarding Iran business
oberbank.com/iranbusiness_02012019
The withdrawal of the USA from the international agreement with Iran UCPOA) and its threat of
secondary sanctions have also altered the framework conditions for European companies with
regard to business with Iran.
During the past two years, Oberbank has assisted numerous customers with their Iranian
business. However, the danger to European companies posed by the possible imposition of
secondary US sanctions also compels us to withdraw.
Oberbank principles governing Iran-related business
Assumption of business relationships
As was previously the case, no business relationships will be formed with companies, retail
customers or beneficial owners with registered offices or domiciles in Iran.
Financing
No loans under cover of OeKB (Austrian Export Credit Agency Oesterreichische Kontrollbank)
will be provided under the terms of the framework agreement regarding financing. Moreover, to
date no mature projects for financing have been presented. Oberbank has never granted free
financing for transactions relating to Iran.
Services {payment transactions, letters of credit)
The Oberbank will only support especially experienced, selected existing customers, who in the
past have already reliably handled their business with Iran via our institute, with the supply of
permitted humanitarian goods (solely foods, agricultural products, medicaments, medical
products) subject to general international conditions and the relevant regulations covering
money laundering prevention in Iran.
Correspondent bank relations
New correspondent banking relationships will not be entered into. SWIFT has disconnected the
Iranian correspondent banks affected by secondary sanctions from the payment transfer
system and therefore no transactions can be carried out with these banks.
Gesch~ftspolitische Ma~nahmen im Irangesch~ft (German version)
111

- 323 -

- 324 -

Annex 156
Email of DZ Bank to its branches, 16 May 2018

- 325 -

- 326 -

DZ Bank
From: B~~gen, Christian [mailto:[email protected]]
Sent: Thursday, February 07, 2019 11.27 AM
To: '[email protected]' <[email protected]>
Subject: WG: DZ Bank
Dear Mr. Mohammadi,
Below please find a link under which an official statement of DZ Bank is available.
https://daserste. ndr.de/panorama/archiv/2018/E-Mail-der-DZ-Bank-an-die-
F ilialen, handelskrieg122 html
Due to the fact that the article is in German language, here please find a free English translation
which could be sent to CBI:
As of 31.05.2018 11:14 am
E-mail of DZ Bank to the branches
Sent: Wednesday, May 16, 2018 1:27 pm
Subject: Closure of the Iran business on 30.06.2018
Dear Sirs and Madames,
Our central bank DZ BANK informed us about the following:
"Considering of the current political development and the US exit from the Joint
Comprehensive Plan of Action (JCPOA), we are forced to discontinue Iran-related payment
transactions as of June 30, 2018. This means: From July 1, 2018 DZ BANK will return all
transactions relating to Iran. Increasing requirements for the examination of sanction
compliance for merchandise exports as well as the reputation of our Cooperative Financial
Network Volksbanken Raiffeisenbanken are the main reasons for this decision. Transition
period for existing transactions: Transactions received by us until June 30, 2018 will be
processed until August 6, 2018, provided that we have the necessary documents for sanction­
compliant settlement within the framework of our individual case-by-case reviews.
The settlement of domestic payments (currency EUR) of Iranian banks, companies and
individuals resident in Germany shall remain exempted from these restrictions even after 30
June 2018, unless such transactions are used to settle Iran transactions. "
Jfyou have any questions, please contact the supervisors of the international business under
the following contact details.
In case of any other questions please contact me.
Mit freundlichen Gr~~en / Best regards
Christian Baessgen
Team Manager Correspondent Banking
Phone: +49 40 32109-453
Fax: +49 40 32109-459
E-Mail: cbaessgen@eihbank de
Website: www.eihbank.de
- 327 -

Europ~isch-lranische Handelsbank AG • Depenau 2 • D-20095 Hamburg
Vorstand / Board of Management: Dr. Ramin Pashaee Fam (Vorsitzender / Chairman), Sabine Hummerich­
Metzger, Arash Onsori
Aufsichtsrat / Supervisory Board: Dr. Hossein Mehri (Vorsitzender / Chairman)
BIC EIHBDEHH • Register: Hamburg HRB 14604 • UST-ID/VAT-ID: DE 118513728
Vertraulichkeit: Dieso E-Mail inkl. aller Anlagen enth~lt vertrauliche und/oder rechtich gesch~tzte Informationen. Wenn Sie nicht der nichtige
Adressat sind oder diese E-Mad irrt~mlich erhalten haben, informieren Sie bitte sofort den Absender und loschen Sie diese E-Mail. Das
unertaubte Kopieren sowie die unbofugte Weitergabe, such von Teilen dieser E-Mail, sind nicht gestattet
Sicherheit: Die Bank hat alls verkehrsublichen Ma~nahmen getroffen, um das Risiko der Verbreitung virenbefallener Software oder E-Mails zu
minimieren. Dennoch k~nnen wir autgrund der Natur des Internets das Risiko eines Computervirenbefalls dieser E-Mail nicht ausschlie~en. Wr
empfehlen Ihnen daher dringend, eigene Virenkontrolien durchzuf~hren.
Confidence: This E-Mat incl. all attachments may contain confidential and/or privileged information. tf you are not the intended recipient or have
received this e-mail in error, please notify the sender immediately and delete this e-maid. Any unauthorized copying, disdosure or distribution,
even of parts of this o-mail, is strictly forbidden.
Security: The bank has taken precautions to minimize the risk of transmitting software viruses, but nevertheless, according to the nature of
.
internet, the bank cannot guarantee a clean e-mail. We urgently advise you to carry out your own virus checks on this e-mail.
gt Think before o print
- 328 -

w
E-Mail der DZ Bank an die Filialen [ Das Erste - Panorama - Sendungen - 2018
i
i
N~chster Sendetermin
Do, 14.02. 2018[2145 Uhr
Start
@
Sendungen
Meldungen
L
4
Service
Redaktion
Stand: 31.05.18 11.14 Uhr
E-Mail der DZ Bank an die Filialen
Gesendet: Mittwoch, 16. Mai 2018 13:27
Betreff: Einstellung des Irangesch~fts zum 30.06.2018
Sehr geehrte Darnen und Herren,
unsere Zentralbank DZ BANK teilte uns folgendes mit:
"Vor dem Hintergrund der aktuellen politischen Entwicklung und dem Ausstieg der USA aus dem 1CPOA (loint
Comprehensive Plan of Action) sehen wir uns veranlasst, nun auch den Zahlungsverkehr mit lranbezug zum 30.
Juni 2018 einzustellen. Das bedeutet: Ab dem 1. Juli 2018 wird die DZ BANK siimtliche Transaktionen mit
ranbezug retournieren. Zunehmende Anforderungen an die Pr~fung der Sanktionskonformit~t f~r Warenexporte
als auch die Wahrung der Reputation unserer genossenschaftlichen FinanzGruppe Volksbanken Raiffeisenbanken
sind ma~gebliche Beweggr~nde fur diese Entscheidung. ~bergangsfrist fur Altgesch~fte Transaktionen, die uns bis
einschlie~lich 30. Juni 2018 vorliegen, werden wir bis zum 6. August 2018 abwickeln, sofern uns entsprechende
Unterlagen f~r eine sanktionskonforme Abwicklung im Rahmen unserer bisherigen Einzelfallpr~fungen vorliegen.
Die Abwicklung des inl~ndischen Zahlungsverkehrs (W~hrung EUR) von in Deutschland ans~ssigen iranischen
Banken, Unternehmen und Personen bleibt von diesen Einschr~nkungen auch nach dem 30. Juni 2018
ausgenommen, sofern diese Transaktionen nicht zur Abwicklung von r
ngesch~ften genutzt werden."
- 329 -
a
F~r Fragen stehen Ihnen die Betreuer des Auslandsgesch~fts unter den nachfolgenden Kontaktdaten zur
Verf~gung.
CD
Dieses Thema im Programm:
Das Erste I Panorama I 31.05.2018 I
21:45 Uhr
https://daserste.ndr.de/panorama/archiv/2018/E-Mail-der-DZ-Bank-an-die-…
1/1

337
.-be­
·� -·•-"•,--.-�·-uof oz�
Vorstands-Information
Rundschreiben
Einstellung des Irangesch~ftes
16.0$.20i8
• 1011
Sehr geehrte Damen und Herren,
Praetttt
&a4$ fifrt awn Mi
in der Vorstands-Information Nr. 2018/027 haben wir Sie ~ber die partielie Aussetzung
Tetton +4$ 69 74470
llr 49 497447-184$
des dokument~ren Gesch~ftes mit Iranbezug (einsctlie~lich Drittlandgesch~ft) informiert.
Gleichzeitlg hatten wir Ihnen mitgeteilt, vorerst den Zahlungsverkehr mit lranbezug im
rdtt.ark.
wwwatt.d
Kundeninteresse aufrecht zu erhalten.
oward
wotgng inc tMerruden
Vollst~ndige Einstellung des Zahlungsverkehrs mit lranhintergrund
L @rgtr
Vor dem Hintergrund der aktuellen politischen Entwiklung und dem Ausstieg der USA
De. Cvistun @nan
aus dem JCPOA (oint Comprehensive Plan of Action;
- 330 -
;
sehen wir uns veranlasst, nun auch
waitgw Kb
Dr. Crtar aw
den Zahlungsverkehr mit lranbezug zum 30. Juni 2018 einzustellen.
cat
am Uc
Das bedeutet: Ab dem 1. Juli 2018 wird die DZ BANK s~mtliche Transaktionen mit
lranbezug retournieren.
Gt.lb«voted«tiger;
U th
oar
des At kt
Zunehmende Aforderungen an die Pr~fung der Sanktionskonformit~t f~r Warenexporte
elrt Gertsch.d
als auch die Wahrung der Reputation unserer genossenschaflichen FinanzGruppe
Volksbanken Raiffeisenbanken sind ma~gebliche Beweggr~nde f~r diese Entscheidung.
0&Air A
bi
Zent-Gosch.rt.ha,
fart Min
Gbergangsfrist f~r Altgesch~fte
"'"
Transaktionen, die uns bis einschfie~lich 30. Juni 2018 vorliegen, werden wit bis zum
fall an Min
Atgictfeltur Mi
6. August 2018 abw
i ckeln, sotern uns entsprechende Unterlagen f~r eine
deg. 9 4$451
sanktionskonforme Abwickiung im Rahmen unserer bisherigen Einzelfallpr~tungen
vorliegen.
M4et.-tr. Di +1410491
Die Abwicklung des inl~ndischen Zahlungsverkehrs W~hrung EUR) von in Deutschland
ans~ssigen iranischen Banken, Unternehmen und Personen bleibt von diesen
Einschr~nkungen auch nach dem 30. Juni 2018 au5genommen, sofern diese
Transaktionen nicht zur Abwicklung von lrangesch~ften genutzt werden.
EI DZ BANK
Die Initiativbank

Vorso«ds-itcroti Rundschreiben
DZ BANK
·- 2/2.
Wir bedanken uns f~r Ihr Verst~ndnis und stehen Ihnen f~r R~ckfragen gerne zur
Vert~gun9.
Mit freundlichen Gr~~en
02 BANK AG
lhr Ansprechpartner fur
2ahlungvrehn·Awitklw
Yelton
£-Ml
h8-Center
069 74427-92920
finasant/onsbrwachung
0211 778-2121
(Reglan West

- 331 -

- 332 -

Annex 157
Email from BCP Bank to Export Development Bank of Iran (EDBI), 16 May 2018

- 333 -

- 334 -

r
RE: Returi of PIO - INTL.DIV/986/RIN - Reminder - reza.shabani
https://webmail.edbi.irlowa/#viewmodel=ReadMessageltem&lteml...
International Affairs Division
Export Development Bank of Iran
Phone: +9821 8870 3463, +9821 8870 2300
Fax: +9821 8870 0755, +9821 8870 3195
Email: [email protected]
From: INAEBNIT Richard <Richard INAEBNIT@BC-BANK_com>
Sent: Wednesday, May 16, 2018 11.19
To: reza.shabani; CELIK Davut
Cc: maryam.khalili
Subject: RE: Return of P/O -INTL.DIV/986/RIN - Reminder
Dear Reza,
Following the recent development regarding the JCPOA, we are unfortunately no longer in a position to process such
payments.
We thank you in advance for your understanding and remain
with kind regards
Richard
···- ·-- ·
· -------------------------··· --
From: reza.shabani [mailto:reza.shabani@edbiir]
Sent: mercredi 16 mai 2018 07:29
To: CELK Davut
Cc: INAEBNIT Richard; maryam.khalili
Subject: Re: Return of P/O - INTL.DIV/986/RIN - Reminder
Importance: High
//Reminder
From: reza.shabani
Sent: Sunday, May 13, 2018 14.24
To: [email protected]
Cc: INAEBNIT Richard; maryam.khalili
Subject: Req: Return of P/O - INTL.DIV/986/RIN
Dear Davut,
Good day,
In order to prevent further burden on your esteemed bank and avoid further charges on our
clients, kindly provide us the reason of rejecting the P/O with the following ref.:
MT195 - DD180512
F.20: INTL.DIV /986/RIN
20f3
05/16/2018 12:32

- 335 -

- 336 -

Annex 158
Email from BCP Bank to Bank Pasargad Iran, 22 May 2018

- 337 -

- 338 -

5/22/2018
https://mail .bpi.ir/print/printmessage
---
RE: our LC No. 349/4/97701834, in favour of "SANOFI WINTHROP INDUSTRIES"
5/22/18 11:46 AM
From: CELIK Davut <Davut.CELIK@B
-BAKcom>

- 339 -
C
To: "[email protected]" <[email protected]>, TORRES Guillermo <Guillermo.TORRES@bcp­
bank com>, INAEBNIT Richard <[email protected]>
Dear Mahnaz,
It is nice talking to you this morning.
At present, unfortunately, we are not in a position to accept any new transactions, be it payments or LCs.
We will finalize all transactions already in our books.
We will let you know shortly about our new position given the recent developments regarding JCPOA.
l apologize for any inconvenience.
Best Rgds
From: [email protected] [mailto:[email protected]]
Sent: lundi 21 mai 2018 10:55
To: TORRES Guillermo; CELIK Davut; INAEBNIT Richard
Subject: our LC No. 349/4/97701834, in favour of "SANOFI WINTHROP INDUSTRIES"
Dear Sirs
Hope this email finds you well
furtber to your MT799 DD 180517 your Ref: "INTL.DIV/986/RIN regarding your bank's decline to accept
handling our LC No. 349/4/97701834, in favour of "SANOFI WINTHROP INDUSTRIES", this is to kindly
inform you that despite the fact that according to the recent unilateral decision of US , a wind down period has
been set up to Nov 2018, aforesaid LC is related to raw materials for medicine and hence nothing contrary to the
regulations.
Moreover the LC is in EUR and you are well aware that the European Economic society in a prudent manner has
supported the trade relations between Iran and European countries.
Hence you are kindly requested to reconsider your good bank's decision in this regard and please do not hesitate
to contact us, should you require any further details.
Thank you in advance for your kind cooperation and support.
Best Regards
Mahnaz Asgharzadch
Deputy Correspondent Banking Dept
Bank Pasargad
This e-mail and its attached files are for the sole use of the intended recipient(s). It may contain confidential,
proprietary or legally privileged information. If you are not the intended recipient or have received this e-mail
by error, please immediately destroy it and notify [send it back to) the sender. Any views or opinions presented
are only those of the author and do not represent those of Banque de Commerce ct de Placements SA (BCP) or
any of its subsidiary companies. Unauthorized publication, use, dissemination, forwarding, printing or copying
of this e-mail and/or its attachments, either whole or partial, is strictly prohibited. BCP does not guarantee the
origin of this message, or the integrity of its contents. This e-mail does not represent an invitation to enter into
any business or transaction. Its content does not constitute a formal commitment by the Bank and is not legally
binding on the Bank, notably as it may have been altered without the Bank's knowledge. There are substantial
related risks, such as lack of confidentiality, potential manipulation of content and/or senders address,
interception, loss, destruction, late arrival, viruses, etc. The Bank excludes all liability in this respect. It is
recalled that communication via the Internet, such as via non -encrypted e-mail, is not secure and BCP excludes
httos://mail.bpi.ir/print/printmessage
1/2

- 340 -

Annex 159
SWIFT message from PKO Bank to Bank Pasargad, 28 May 2018

- 341 -

- 342 -

+ ASAP2 Print Instance - ASAP2 60602(ACCESS7) Printed on 2018-05-29 7:34:52 AM ++
°
--------------------- Instance Type and Transmission ------------­
Copy received from SWIFT
Priority
: Normal
Message Output Reference
0732 180529BKBPIRTHAXXX8405172219
Correspondent Input Reference
: 1422 80528BPKOPLPWAXXX1835306745
----------
phesSa Hoa&or -----------­
Swift Output
FIN [299 Free Format Message
Sender
BPKOPLPWXXX
-.
'PKO BANK POLSKI S.A.
WARSZAWA PL
(
°.
+
Receiver
BKBPIRTHXXX
6leJt
BANK PASARGAD
TEHRAN IR
--------------------Messae 'T'eyt
20: Transaction Reference Number
DB2/DT/280518
21: Related Reference
NONE
79: Narrative
ATTN. MR. MAHNAZ ASGHARZADEH, CORRESPONDENT
BANKING DEPARTMENT, INTERNATIONAL AFFAIRS
RE: YOUR EUR ACCOUNT WITH PKO BANK POLSKI SA
WE REGRET TO INFORM YOU THAT DUE TO OUR NEWLY
INTRODUCED INTERNAL POLICIES WE KINDLY ASK YOU TO
CLOSE YOUR EUR ACCOUNT WITH US NO
PL 09102000161209780000007238 AS ON JUNE 29, 2018.
PLEASE INSTRUCT US WHERE SHOULD WE TRASFER THE
REMAINING BALANCE.
IN CASE IF ANY DOUBTS OR QUESTIONS PLEASE CONTACT
US VIA EMAIL: DBZ.BANKI{AT)PKOBP.PL.
THANK YOU FOR YOUR CO-OPERATION.
BEST REGARDS
INTERNATIONAL AND INSTITUTIONAL BANKING DEPARTMENT
PKO BANK POLSKI SA
--.----------------Message 'Trailer
{CHK: 5395E014AC3D)
{DLM:)
PKI Signature: MAC-Equivalent
j

- 343 -

- 344 -

Annex 160
Letter from Raiffeisen Bank to Bank Melli, 29 May 2018

- 345 -

- 346 -

3 1MA! 201
@ Raiffeisen Bank
8u2
-
[]International
Bank Melli Iran
Paris branch
­
c..,20
433, Avenue Montaigne
75008 Paris
France
Vienna, May 29, 2018
I
Termination of the account relationship
Dear Sirs,
we kindly refer to our longlasting business relationship held with your esteemed bank.
Following the occurrence of the Implementation Date under the Joint Comprehensive Plan of Action
UJCPO A} on January 16, 2016, Raiffeisen Bank International {RB') was confident that such step will
result in intensified international busiress relations with the Islamic RRepublic of lran and your esteemed
bank. RBl has therefore initiated the KYC process with your esteemed bank in order to reactivate the
business relationship.
However, the situation has changed dramatically recently. You will be aware of the announcement of
the president of the United Slates o America to withdraw from the CPOA and the consequences for
the international banking community globally resulting therefrom. The actual international political and
legal environment imposes restrictians on us which do not permit us anymore to maintain the account
relationship with your esteemed bank.
In view of the present unfortunate factual, legal and political situation, RBl's Board of Management
deemed it necessary to make the decision to terminate the qgcount relationship with your esteemed
bank. Hence, according to sectian 22 of our General Termsnd Conditions, ws herewith provide you
with the notification ol termination of the account relationship with your esteemed bank with effect as
of June 28, 2018 (he "Termination Date").
Thus, as of the Termination Date we shall close all occounts and transfer any remaining credit balances
(if ony)­
We may thank you in advance for providing us with your bank account details for transferring
remaining credit balances on any of your esteemed bank's other EUR accounts.
It is unfortunate and we sincerely regret that RBl is constrained to take such action. However, RBI will
continue to look ahead to when the situotion will improve permitting lo reconsider the resumption ot
the business relationship with your esteemed bank.
Ralffoisen Bank Intornational AG • '­
.

- 347 -

- 348 -

Annex 161
Email from Danske Bank, 30 May 2018

- 349 -

- 350 -

+
..
'­
---.
� .
. . . .
. . ;;•;i:· ... .-·
:Yi.
artment
toyberg.<[email protected]>
ay;May 3;2018·121 PM
.
u,-·----·--· .
..
& bank's relation department
LT Financing/Framework Agreement
our, Mr Rasoolzadeh and Ms Shahabady,
· --- -�
·
.
·
--·· ---- ··-· 2-�1-3 9- ..
redoing well despite all the current·volatility.
et#g@
E@Due to the latest developments and statements from the US government in relation to the JCPOA, and the imminent
"?"introduction of Sanctions, Danske Bank has decided to honour the short term commitments of contracts in which we are
engaged (i.e. received, signed and initiated) with customers, banks and ECAs, but under the terms of the statements
from the US government.
As a further consequence however, we are unable to continue the dialogue on the longer dated financing for the time
being. This is obviously very unfortunate and I can only hope that it's a temporary measure.
f
3
we are dvising our corporate clients similarly today.
If you have any questions then please do not hesitate to get in contact with us.
8rgds, Karsten
Karsten Stroyberg
Global Head - Central Banks & Sovereign Wealth Funds
International Financial Institutions
E-mail: kstr@danskebankcom
Phone: +45 45 12 83 23
Mobile: +45 29 17 90 01
Danske Bank
Holmens Kanal 2-12
+i
1,
1092 Copenhagen K'
Denmark
u~:isedans±shack:ani@an@ialinsiii@ions
htps:{icsenrch nskebnkcom/res~arch;
Dusk Runk AS CVR.nr, 61126228 .Kbenhn
modt•gtt
r�troli�
Denne nl•1' kun ill<;c��lde
infotrn•linn. Har du

- 351 -
'
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om ftjr,n - o_g �f1�rf"IJ:t<1dt �ltlle m:iltn i'dir •�Siem
n•niJto vcd en fcjf. hrdrr "i oi!l dtifor
uden at viderescnde elle kopicre den, Selv pm muilen og vtdhz/yede bihg efter vores overbevisning er[;i fax virus og ndre fl, som kn pvirke computer cter it-ysicmct.
hvo: den modtsges og lases. &hnes den
p' modtgcrens cget unf Vi pa:t & ile noget nsv« fa: tub og s&de, sorm er opst~et i forhinudetse me} a mod.ge g btugr
maikr..
.
· .
,
·
.
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. f
'
.
.
•
·
·
.
·

- 352 -

Annex 162
Email from BCP bank to Export Development Bank of Iran (EDBI), 31 May 2018

- 353 -

- 354 -

Mail - [email protected]
https://webmail.edbi.ir/owa/#path=/mail/AAMkADBjZTRhNDhmL...
Fw: Iranian Banks
maryam.khalili
Sa1 2018-06-02 13.04
Inbor
Tare7a shabani <reza.shabani@edbiir>;
7ht4ye K4alate
Manager International Relations Dept
International Affairs Division
Export Development Bank of Iran
(Tel: +98 21 88703463- 21 81920611
6 Fax. +98 21 88700755- 21 88703195
· Email: [email protected]
From: INAEBNIT Richard <Richard.INAEBNIT @BCP-BANK.com>
Sent: Thursday, May 31, 2018 5:46 PM
To: meryam.khalifi; CELIK Oavut
Subject: RE: Iranian Banks
Dear Maryam,
With reference to your below e-mail, kindly note that our policy has not changed and we are in the process of winding down all Iran
related transactions.
We are aware of some news circulating in Iran pretending the contrary, which is however not true.
With kind regards
Richard
Richard INAEBNIT
Vice President
International Department
BANQUE DE COMMERCE ET DE PLACEMENTS - BCP
Rue de la Fontaine 1
P.O. Box 3069
CH-12n1 Geneva 3
Tel + 41 58 90919 86
richard inaebnit@bcp-bank con
Fas + 4122 310 63 80 wwbcp bank,con
----- -------·
From: maryam.khalili [mailto:[email protected]]
Sent: jeudi 31 mai 2018 10:02
To: CELIK Davut
Cc: INAEBNIT Richard
Subject: Re: Iranian Banks
Dear Mr. Celik,
I of6
06/14/2018 1143
- 355 -

Mail - reza shabani@edbi:ir
https://wcbmail.edbi.ir/owa/#path=/mail/AAMkADBjZTRhNDhmL..
Good day and hope you are doing fine.
Further to the recent developments and your announcement to the Iranian banks regarding your policy for preventing
from accepting new Iran related transactions, I would like to ask about any new decision made by your good bank as we
hear seemingly there are some changes from your side and the resumption of relations with the Iranian banks has been
taken into cosideration.
would be pleased to hear from you soon in this respect.
Kindest regards
7%(au <lated
Manager International Relations Dept
International Affairs Division
Export Development Bank of Iran
(Tel. +98 21 88703463- 21 81920611
6 Fax +98 21 88700755- 21 88703195
• Email: [email protected]
From: CELK Davut <[email protected]>
Sent: Tuesday, May 22, 2018 4.25 PM
To: reza.shabani; INAEBNIT Richard; TORRES Guillermo
Cc: maryam.khalili
Subject: RE: Iranian Banks
Dear Reza,
At present, all Iranian banks are same. We will not handle any new transactions for the time being.
We will inform you if something changes.
Rgds
From: reza.shabani [mailto;reza.shabani@edbiir]
Sent: mardi 22 mai 2018 12:20
To: CELIK Davut; INAEBNIT Richard
Cc: maryam.khalili
Subject: Req: Iranian Banks
Dear Davut,
Good day,
As per our previous emails, and as our clients are approaching the other Iranian banks for their current
transactions kindly provide us with the names of the Iranian banks from which you may accept and handle any
new transactions so that our customers may directly approach them for their future transactions.
Thanks and kindest regards, I remain.
Reza Sha'bani
Correspondent Banking Dept.
International Affairs Division
Export Development Bank of Iran
Phone: +9821 8870 3463, +9821 8870 2300
Fax. +9821 8870 0755, +9821 8870 3195
Email: [email protected]
2of6
06/14/2018 1143 4.3
- 356 -

f
Mail - [email protected]
https://webmail.edbi.irlowa/'#path=/mail/AAMkADBiZTRhNDhmL...
From: CELIK Davut <[email protected]>
Sent: Wednesday, May 16, 2018 12.27
To: reza.shabani; INAEBNIT Richard
Cc: maryam.khalili
Subject: RE: Return of P/O -INTL.DIV/986/RIN - Reminder
Dear Reza,
We are currently not in a position to execute your payment orders, as mentioned in our previous message, given the recent
developments.
For the time being, we only execute previously committed transactions (L/Cs, payments, etc.) for Iranian banks.
As we have no outstanding LCs with your good bank, we decided to close your account shortly. We will inform you officially in the next
couple of days. Please make preparations to transfer your Euro and CHF account balances as you see appropriate.
I apologize tor all this, due to events not within our control. Please don't hesitate to ask us if you have any questions.
Best Rgds
From: reza.shabani [mailto:[email protected]]
Sent: mercredi 16 mai 2018 08:59
To: INAEBNIT Richard; CELIK Davut
Cc: maryam.khalili
Subject: Re: Return of P/O - INTL.DIV/986/RIN - Reminder
Importance: High
Dear Richard
Good day,
Ref to your below email and the attached file under your ref no. GTF833-2018 regarding none-execution of the
P/O, as per F.77A you have stated that:
Quote
"Due to the current situation and developments, we are unfortunately no longer in a position to process such
payments"
Unquote
Kindly provide us with more details regarding your new policy toward handling Transactions, L/Cs, and any
exceptions (your own clients....) and any other provisions you might propose.
Thanks and looking forward to receiving your feed back on this at you utmost urgency.
Best Regards,
Reza Sha'bani
Correspondent Banking Dept.
International Affairs Division
Export Development Bank of Iran
Phone: +9821 8870 3463, +9821 8870 2300
Fax: +9821 8870 0755, +9821 8870 3195
Email: [email protected]
From: INAEBNIT Richard <Richard.INAEBNII@BC?-BANK_com>
J of6
06/14/2018 1143.
- 357 -

Mail - reza.shabani@edbir
https://webmail.edbi.irlowa/#path=/mail/AAMADBjZTRhNDhmL...
Sent: Wednesday, May 16, 2018 11:19
To: reza.shabani; CELIK Davut
Cc: maryam.khalili
Subject: RE: Return of P/O - INTL.DIV/986/RIN - Reminder
Dear Reza,
Following the recent development regarding the JCPOA, we are unfortunately no longer in a position to process such payments.
We thank you in advance for your understanding and remain
with kind regards
Richard
From: reza.shabani [mailto;reza.shabani@edbi ir]
Sent: merredi 16 mai 2018 07:29
T0: CELIK Davut
Cc: INAEBNIT Richard; maryam.khalili
Subject: Re: Return of P/O - INTL.DIV/986/RIN - Reminder
Importance: High
//Reminder
From: reza shabani
Sent: Sunday, May 13, 2018 14.24
To: [email protected]
Cc: INAEBNIT Richard; maryam.khalili
Subject: Rea: Return of P/O -INTL.DIV/986/RIN
Dear Davut,
Good day,
In order to prevent
further burden on your esteemed bank and avoid further charges on our clients, kindly
provide
us the reason of rejecting the P/O with the following ref.:
MT195- DD180512
F.20: !NTL.DIV/986/RIN
F.21: HS13279715840
Reason: Internal Policy?
(File Attached)
This is to make sure such transactions won't be effected any more,
Thanks and kindest regards
Reza Sha'bani
Correspondent Banking Dept.
International Affairs Division
Export Development Bank of Iran
Phone: +9821 8870 3463, +9821 8870 2300
Fax: +9821 8870 0755, +9821 8870 3195
Email: [email protected]
06/14/2018 11.43 •
4 of6

- 358 -

Annex 163
SWIFT Message from BCP Bank to Bank Pasargad Iran, 7 June 2018

- 359 -

- 360 -

++ ASAP2 Print Instance - ASAP2_61524(ACCESS7) Printed on 2018-06-07 8:14:02 AM >
------------------- Instance Type and 'Transmission -----------­
Copy received from SWIFT
Priority
: Normal
Message Output Reference
0735 180607BKBPIRTHAXXX8415172630
Correspondent Input Reference
: 0917 180605BPCPCHGGAXXX9601214181
--------------------------- Message Header-------------------------
Swift Output
: FIN!299 Free Format Message
Sender
BPCPCHGGXXX
BANQUE DE COMMERCE ET DE PLACEMENTS S.A. (8CP)
GENEVA CH
Jal';)!yd»-l A»,Sil
nywj!abs
·r
t.{·&
Receiver BKBPIRTHXXX
BANK PASARGAD
TEHRAN IR
MUR : E299180604012562
----------------pessae '[ext
20: Transaction Reference Number
INTL.DIV/986/RIN
21: Related Reference
none
79: Narrative
ATTN: INTERNATIONAL AND CORRESPONDENT BANKING
DEPARTMENT
DEAR SIR/ MADAME
WE REFER TO THE RECENT DEVELOPMENTS WITH REGARDS
TO THE DECISION BY THE UNITED STATES TO CEASE ITS
PARTICIPATION IN THE JCPOA ON MAY 8, 2018 AND THE
SUBSEQUENT RE-IMPOSING OF RELATED SANCTIONS.
GIVEN THIS SITUATION WE REGRET TO INFORM YOU THAT
WE ARE UNFORTUNATELY NO LONGER IN A POSITION TO
PROCESS TRANSACTIONS FOR BENEFICIARIES
HAVING THEIR ACCOUNTS WITH THIRD PARTY BANKS.
¥ TRANSACTIONS INVOLVING BCP'S OWN CUSTOMERS ARE
HANDLED ON A CASE BY CASE BASIS.
IT IS UNDERSTOOD THAT DEALS ALREADY BOOKED
WILL BE FINALIZED AS ORIGINALLY AGREED.
WE WILL NOT FAIL TO INFORM YOU OF ANY CHANGE IN
BCP POLICIES IN THIS REGARD.
WE APOLOGISE FOR THIS UNFORTUNATE SITUATION WHICH
IS BEYOND OUR CONTROL AND THANK YOU IN ADVANCE
FOR YOUR UNDERSTANDING
SINCERELY YOURS
BCP - INTL'DEPT
I
------------------------ bes5a~e 'l'ran1ler ---------­
{CHK:559F3F595CB1)
{DLM:)
PKI Signature: MAC-Equivalent
f
I
I
I

'
- 361 -

- 362 -

Annex 164
SWIFT message from Skandinaviska Enskilda Banken (SEB) to Bank Melli,
9 June 2018

- 363 -

- 364 -

ASAP2 Print instance - ASAP2_79944(SEPAM2013) Printed on 6/9/2018 10:07:51 AM •
,,._
Message already printed: No
Msg Sequencel: 1/l
Msg Type
Queue: PrintFile
·--
Order Sequence#: 168030
: FIN799
RFH2 Entries
««.....«««... .«...««.....«...4
«.«.«..«
OU: BM!IXXX
Msg ID: 51199bd06ba61le88f200a£2042b00000000000000000000
F'IN: Y
FMT: N
MsgDigest
: 1wjD5BnWVH4NO1J0JmOAnI3vcyjheNfMPdaUxu5t0GM=
..«. .. . «. e
•
•••••••••••
.«..
-..... ..••.. «..«..-.
Local Address : MELIIRTHALGD
Remote Address: MELIIRTHAXXY
.... ..
.....
..--«-..-.................
Basic Header
Application Id F APDU Id O1 LT Address MELIIRTHALGD
Session Number 0000 Sequence Number 031012
Application Header
Output Identifier O Message Type 799
I
Input Time 0531 Input Date 180609
Sending LT Identifier MELIIRTHA Sending Branch Code x
+
BANK MELLI IRAN
TEHRAN
Input Session 0000 Input Sequence 036467
output Date 180609 Output Time 0531 Priority N
Transaction Reference Number 20
57355324322
Related Reference 2l
72265
Narrative +79
ATTN. FGN GTEES DEPT.
IMPORT GTEES SECT
FOLLOWING YOUR MT799 DATED 3 JUNE 2018.
PLEASE BE AWARE THAT WE ARE STILL"NOT IN A
PosiTioN To c~i~i. wiinouR DEMAND, AS THE
BENEFICIARY IS STILL SUBJECT TO SANCTIONS.
BEST REGARDS,
•
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL),
TRADE FINANCE CLIENT SERVICES
/INS/ESSESES5XXX
Trailers
CHK: 000000000000
I

- 365 -

- 366 -

Annex 165
Email from Banco BPM to Bank Pasargad Iran, 16 July 2018

- 367 -

- 368 -

8/13/2018
https://mail.bpi.ir/print/printmessage
Fwd: Junk E-Mail Rlf: URGENT Inquiry ( Request for Issuance of LG based on our counter guarantee)
7/16/18 12.46 PM
From: '[email protected]" <[email protected]>
To: '[email protected]' <[email protected]>
<[email protected]>
From: Angelo Scala
Sent: 7/16/18 1:04PM
---'
To: [email protected]
Subject; Junk E-Mail Rif: URGENT Inquiry ( Request for issuance of LG based on our counter guarantee)
Dear Ms. Mahnaz,
hope all is fine for you.
s not customer of ours, therefore, and referring the BancoBpm's policy toward Iran, we are not in the position to handle your request as the transaction
with/from Iran are strictly referred to italian clients of BancoBpm.
I take this opportunity to inform you about our position versus Iran and the iranian banks correspondents.
Right now, and by waiting the ncw Us's sanctions, which probably will be applied starting august 2018 and the EU's countcrmoves not yet known, wc have, at present, temporarily
frozen the transactions with Iran excepted some, still in place from the past of course involving the customer of ours only.
Obviously, we hope to restart the business with Iran because we had bccn happy to rcopcn the flows with your country following the Implementation Day on january 2016.
But right now, and with my personal, great disappointment, we have to wait by hoping that the UE will be so strong to defend its own interest against the rest... of the world. (in West
world and in the Middle East as well).
Thank for understanding and sorry.
Hope to have some good news in the forthcoming 1imc.
Good day Ms. Mahnaz.
Angelo Scala (mr.)
lBANCO BP ITALY BAPP122
Are Manager
Financial Institutions Group
International Business and Trade Finance
Tel +39 0458675213
Mobile + 39 3357304692
e-mail [email protected]
-----"[email protected]" <[email protected]> ha scritto: ----­
Per: "[email protected]" <[email protected]>
Da: "[email protected]" <[email protected]>
Data: 16/07/2018 09.38
Oggetto: URGENT Inquiry ( Request for issuance of LG based on our counter guarantee)
of-
.) to issue a Tender Guarantee in favour
Dear Mr. Scala
Hope this email finds you well.
This is to kindly inform you that we have been requested by our customer (
It
i»rough your good bank.
Please note that amount of Guarantee to be issued is equivalent of USD 3 Million in EUR and the project is
Hence we would appreciate
your good bank informing us of your availability to issue the guarantee based on our counter guarantee in favour of- which is the Owner of the
project,
Please do not hesitate to contact us should you require further details on the aforesaid guarantee which is to be issued.
Thanks and Best Regards
Mahnaz Asgharzadeh
Deputy Corespondent Banking dept
Bank Pasargad
Tel: 009821- 82891579; 82891575
Gruppo Banco 8PM - Messaggio di Riservatezza
Il presente messaggio, inclusi gli allegoti, contiene informazioni strettamente riservate e confidenziali, la cui comunicazione o diffusi
Se aveste ricevuto questa e-mail per errore, Vi preghiamo di darne immediata comunicazione al mittente e di cancellarne ogni evidenza dai
https://mail.bpi.ir/print/printmessage
1/1

- 369 -

- 370 -

Annex 166
SWIFT message from DBS Bank (Singapore) to Bank Markazi, 17 July 2018

- 371 -

- 372 -

+++ ASAP2 Print Instance - ASAP2_412868(ACCESS7) Printed on 8/4/2018 3:03:47 PM '
----------- Instance Type and Transmission ----------­
Original received from SWIFT
Priority
: Normal
Message Output Reference
: 1015 180717BMJIIRTHAXXX9958005222
Correspondent Input Reference
1345 180717DBSSGGAXXX6804304553
+------=--
bes5aO \eater -=-----=-­
Swift output
: FIN 199 Free Format Message
Sender
DBSSSGSGXXX
DBS BANK LTD.
SINGAPORE SG
Receiver BMJLIRTHXXX
BANK MARKAZI JOMHOURI ISLAMI IRAN (Central Bank of
Head Office
Tehran IR
..-......-..-........
·--------
tMessad@e Text
20: Transaction Reference Number
FI Support
21: Related Reference
JCPOA
79; Narrative
Attention: Mr Majidi, Assistant Director,
International Dept
Dear Mr Majidi, as you may be aware, there have
been recent developments regarding the Joint
Comprehensive Plan of Action (JCPOA). In view of
such developments, we regret to inform you that
we will not be able to continue providing you
with our Nostro account services and RM?
exchange,
There is currently nil balance in your EUR, CNH
and SGD Nostro accounts with us and these
accounts will be closed off with effect from 20
Jul 2018.
r·
We thank you for your support of DBS Bank Ltd,
Regards
FI Support
DBS Bank
------or
jlessee 'Trailer .­
{CHK: 7A9ED105A2B2)
PKI Signature: MAC-Equivalent

- 373 -

- 374 -

Annex 167
Letter from SCOR Global P&C to Central Insurance of Iran, 18 July 2018

- 375 -

- 376 -

scoR
Tie At & Scene ot Risk
Mr. Gholamali Jahangiri
Reinsurance Director at Iran Insurance
Wednesday, 18 of July 2018
Re: Transacting_Reinsurance Businessinlran
Dear Mr Jahangiri,
I write further to the discussions we have had over the last several months.
SCOR Global P&C has been proud to conduct reinsurance business in the Islamic Republic of
and, during that time, has developed many strong and valued
for many years
Iran ("Iran")
with Iranian clients, including our business partnership with Iran
business partnerships
Insurance.
Promptly following Iran's agreement
of the Joint Comprehensive Plan of Action (JCPOA") with
members of the United Nations Security Council, Germany and the
the five permanent
Union, SCOR moved to put in place the infrastructure and arrangements required to
European
enable its reinsurance business and relationships in Iran to be resumed.
Since re-entering the Iranian Market three significant developments have taken place.
discussions, SCOR's banking partner for Iranian business,
are aware from prior
- As you
and unilaterally advised SCOR it would no longer process
Deutsche Bank, unexpectedly
to and from Iran - effectively preventing SCOR receiving agreed premiums
payments
claim payments. Despite a lengthy and diligent effort to identity
and making required
and contract with an alternative, appropriately credentialed bank with a European
footprint
able to deal with payments
to and from Iran, SCOR has been unable to identify
an appropriate banking partner.
• On May 8, 2018, the United States "withdrew" from the JCPOA and its waiver of its so
called "secondary sanctions" was not renewed, such that its "secondary sanctions
back and (so far as the United States is concerned) operate to prevent non-US
snapped
Persons from conducting, amongst other things, (re)insurance business in Iran.
The United States' "withdrawal" from the JCPOA and the snap back of its "seconaf¥
to further inhibit SCOR's efforts to identify and to contract wit
sanctions" are expected
a credible banking partner -- if not to render the effort futile.
-
Despite discussions having been initiated at the highest diplomatic levels between
France and the United States, last week SCOR became aware that the United State$
has declined to agree
waivers/licenses to exclude French companies from its application
sanctions" regime (similar discussions between other European
of its "secondary
and the United States have been similarly unproductive).
governments
SCOR SE
5, aver:.ue Ki#bur - '5795 Pa!s Codex j - Franc
T61.: +33 (0 : 56 44 70 0)-Fax:3{C} 1 S8 44 85 £¥!- aw.scot.COIT
CS Paris 1I 352 33 3257-$,·: 582 023 357 0046
acid Eutop~cnre n asp.l <!r; 51f 464 357, £8 r&#
- 377 -

scoR
Given these three significant developments, as previously discussed SCOR has determined
that it can no longer continue to transact (re)insurance business in Iran and that it should again
wind-down its Iranian operations and business partnerships. Consequently, current business
will not be renewed, and longer-tem contracts are to be terminated.
SCOR will continue to monitor the commercial and political situation and will react
accordingly.
It has been SCOR's and my personal pleasure and honor to have conducted business with you
and SCOR and I look forward to the opportunity to renew our business partnership in the future.
l wish you and lran Insurance continued business success.
Yours sincerely,
Hodi Hachicha
P&C Treaty CUO, Head Middle East & Africa
SUUR SE
5. nvwr: W~b@r - 75795 ls Ce/r 16 - Fran
l, , +33(0; 1 58 44 7(50.Fax : +'$3 {0) 1 58 44 85 00 - ww.scor.c&an
CS Pais B 562 033 3$7- Siet 562 033 357 00046
Soc'~td Earp&cnre au capital de 1 51 364 057, £8 euros

- 378 -

Annex 168
Letter from La Banque Postale to Bank Melli, 19 July 2018

- 379 -

- 380 -

■
20 u. o ?
issy-les-Moulineaux, le 19 juillet 2018
BA!K MELLI !RAN
43 avenue Montaigne
75008 PARIS
Al'attention de Mr Puya Hemmati
RAR +: 4 445833387138
Monsieur,
Je vous informe que, dans le cadre de notre politique de gestion des risques, La Banque
Postale a d~cid~ de proc~der ~ la cloture de votre compte ouvert dans nos livres sous le
num~ro]
et ce, ~ compter du 19
seP'gm7bre
2018, tel que pr~vu par l'article
L312-1-1V)du code mon~taire et financier.
Je vous remercie de bien vouloir nous ind/quer dans les meilleurs d~lais les coordonn~es de la
banque vers laquelle vous souhaitez faire transf~rer vos ~ventuels avoirs d~tenus dans nos
livres.
Je vous prie, Monsieur, d'avoir l'assurance de ma consid~ration la meilleure.
Dominique Rouquayro de Boisse
Directeur de la Conformite
t
La Barque Pustale - Soodt Anyone @ Orecdoire et Corset. de Surveillance au capita! de 4 046 407 595 ea.roe- Sidge social et adresse postale.115
na ¢e Sres-75 275 Paris Cade 08-RCS Pans 421 00 645 - Code APE 64192 iterr~dre d'assure me. iatkc.id A IORS s le n' 07
023 424

- 381 -

- 382 -

Annex 169
Email from BCP Bank to Export Development Bank of Iran (EDBI), 23 July 2018

- 383 -

- 384 -

RE: Latest status of our account - reza.shabani
https://webmail.edbi.irlowal#viewmodel=ReadMessageltem&lteml...
RE: Latest status of our account
CELIK Davut <[email protected]>
Mon 2018-07-23 1153
To reza shabani <[email protected]>; INAEBNIT Richard <[email protected]>;
ccmaryam khalili <mar [email protected]>; TORRES Guillermo <[email protected]>;
Dear Reza,
Nice to hear from you, and we also appreciated our business with you. Given the recent developments, we stop any
new business with Iran, not only with EDBl but other banks as well, and we will not process any transaction with your
bank. Your account balance with us is NIL and no outstanding/pending transactions on our side.
We thank you for your cooperation and wish you all the best.
Best Rgds
Davut Celik
+4122 909 1944
-­
From: reza.shabani [mailto:[email protected]]
Sent: lundi 23 juillet 2018 06:37
To: INAEBNIT Richard; CELIK Davut
Cc: maryam.khaliliu
Subject: Fw: Latest status of our account
Importance: High
Dear Sirs
Greetings from EDBI
We write to appreciate the corresponding relationship with your esteemed bank and would like to hereby inquire
about the status of our accounts after 4th of November 2018 as on which we may face some limitations for
transferring the proceeds of our previous transactions. Since after the said date we still have outstanding obligations
under letters or credit, bank guarantees or the like, we would appreciate you informing us of the status of our
accounts held with you and the transactions after that date. Also please darify if the remaining balance in our account
could be used for settlement of our outstanding transactions.
Your prompt reply is highly appreciated.
Best Regards,
Reza Sha'bani
Correspondent Banking Dept.
International Affairs Division
Export Development Bank of Iran
Phone: +9821 8870 3463, +9821 8870 2300
1 of 2
07/23/2018 11:57

- 385 -

- 386 -

Annex 170
SWIFT message from Aktif Bank (Turkey) to Export Development Bank of Iran
(EDBI), 25 July 2018

- 387 -

- 388 -

ositie Dupliae olrvery
AL
rYC
932
17383
Near At
mat
t8 1£72£0301R 7+414144$0:2622¢
618O25CAYTTRIS+XX3146850940
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yne ATIR BANK6SIAS
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XPRRT DEVELOPMENT BAN. OF 1
{TERNATIONAL DEPT.
TEHRAN I
MURR.
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5017FT9 DEA&ET
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Fi; r'era Rtnrenee
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»SMC[CS; AS AATIF BAI VELE:LL BT
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£+ OT AUX'ST IIE.
Message friner
l
' CM--::=r�5FS�ITEE£"1
[0::j

- 389 -

- 390 -

Annex 171
SWIFT message from Aktif Bank to DAY Bank, 26 July 2018

- 391 -

- 392 -

re= --=== Instance Type ~rd Transmission -----­
Original 'received from SWIFT
Priority
: Normal
Message output Reference
: 0827 180726DA¥BIRTHAXXX0810013557
Correspondent Input Reference
1726 180725CAYTTRI3AXXX3146850539
a=a«ea««« wa at}#ES2a~.tk [ti~gt4#"" wwhr=we=i«
Swift Output
; FIN 999 Free Format Message
Sender
CAYTTRISXXX
AKTIF YATIRIM BANKASI A.S.
ISTANBUL TR
Receiver DAYUIRTHXXX
BANK DAY
TERAN IR
MUR : 5001195796 DEMET
«oaa«ates$2~e Test •• .a
20: transaction Reference Number
AZ0$02017633
21; elated Reference
NNREF
79; Narrative
DUE TO THE DECISION OF U.S. TO
CEASE ITS PARTICIPATION 1N THE
J01NT COMPREHENSIVE PLAN OF
ACTION (CPOA, AND TO BEGIN
RE-IMPOSING THE U.S, NUCLEAR-RELATED
SANCTIONS, AS AKTIF BANK WE WILL NOT
BE ABLE TO CARRY OUT ANY TRANSA
TION
j
r
j
;

- 393 -
C
WITH YOUR GOOD BANK AS 0F
6TH OF AUGUST 2018.
{CHKR:EB9D893A70E2
tDLM:}

- 394 -

Annex 172
Email from Banca Popolare di Sondrio to Bank Pasargad Iran, 30 July 2018

- 395 -

- 396 -

-
./'
.·
.­
uocumnento senza tit0Io
ad
".«: Inquiry regarding your MT199 Ref:074-farovini-804
- 7/30/18 9.33 AM
From: Andrea Farovini <[email protected]>
To: "[email protected]" <[email protected]>
Dear Shima
Thank you for your ma ii.
Pis be aware that for the time being for existing reimbursement instructions we are in the position to apply for
any reimbursement claim presented by 4" of November . Afterwards according to new scenario defined by USA
sanctions we cannot grant any banking activity. For such a reason it could be necessary to review your
instructions.
I remain at your disposal for any necessity
Kr
Andrea Farovlni
HEAD OF CORRESPONDENT BANKING E SEGRETERIA
Lungo Mallero Cadorna 24
23100 Sondrio (SO)
Banca Popolare'di Sondrio
Tel. +390342528491 ] Mobile. +393385752979
andrea farovini@popso_it
Da: [email protected] [mailto:[email protected]]
lnviato: domenica 29 luglio 2018 06:59
A: Andrea Farovini
Oggetto: Inquiry regarding your MT199 Ref.074-farovini-804
Dear Sir,
Re your good bank's MT199 dated 21° July 2018 under ref 074-farovini-804, regarding new limitation in services available to
our bank, you are kindly requested to advise us whether such limitation for accepting new reimbursement instruction will be
effect reimbursement authorities already sent by us prior to your above mentioned notification.
Please note that some of our previous reimbursement instruction will be effect one year later.
Looking forward to your kind reply.
Best Regards
Shima Mafrouzi
Correspondent Banking Officer
International Affairs
Bank Pasargad
Tel:+98 21 82891581,82891575
Fax:+9821 88649521
.-.....-..----.---
AVERTENZE LEGAL - I contenuti di questo messaggio, proveniente da un indirizzo di posta elettronica aziendale delle Banca Popolare di Sondr
i o, e gll eventualt allegati possono
!

- 397 -
:
essere letti e utilizzati, per esigenze lavoralive. da chi opera alle dipendenze o per conto della stessa, o I! comunque coinleressato nelrinerente relazione d"affari. Le dichiarazioni, ivi
contenute, non impegnano contrettualrente la Banca Popolare di Sondrio se non nei limiti di quanto eventualmente previsto in accordl opportunamente formalizzati. Se ll
messaggio
~ stato r
cevuto per errore ce ne scusiamo, pregando di segnalare ci al mittente e poi di distruggerlo senza farne alcun uso poich~ futilizzo senza averne diritto b
i
vietato dala legge e potrebbe costituire reato.
DATT SOCIETARI - BANCA POPOLARE DI SONDRIO - Soclet~ cooperativa per azioni - Fondata nel 1871
Sede sociale e direzione generale; I- 23100 SONDRIO S0 - piazza Garibaldi, 16
dirt2zzo Intemet: http [doppiabarra]wwwlpunto]popso[punto]it - E-mail: Info[chiocciola]popso[punto]it
lscritta al Registro delle Imprese di Sondrio al n. 00053810149, all'Abo delle Banche al n, 842, all'Albo delle Societ~ Cooperative al n. A160536 Capogruppo de} Gruppo bancario
Banca Popolare di Sondrio, iscritto all'Albo dei Gruppi bancari al n. 5696.0 Aderente el Fondo Interbancario di Tutela dei Depositi e al Fondo Nazlonale di Garanzia - Codice fscale e
partita IVA: 00053810149
; Capitale soclale: € 1,360.157.331 - Riserve: € 947.325.264 (Dal approveti dall'Assemblea dei soci del 29 aprile 2017).
I N.8. I 'fittri antivirus· e 'antispam· in uso su molti slsternl di posta elettronica possono talvolta ritardare o impedire, in tutto o ln parte, il recapito dei messaggi. In tall casi, salvo
; verifica di avvenuta ricezione, pu essere necessario modificare i contenuti o le modalrt~ d'invio.
...--..-.-.-.
https://mail.bpi.ir/print/printmessage
1/2

- 398 -

Annex 173
Email from Partner Re to Central Insurance of Iran, 3 August 2018

- 399 -

- 400 -

Motesharei
Fram:
Antoine Gomot ([email protected]) <[email protected]>
Sent:
To:
Friday, August 03, 2018 8:19 PM
'[email protected]'
Cc:
Salvatore Orlando
Subject:
RE: PartnerRe communication - Iranian Business > Iranian Pool Per Risk XOL end Iranian
Pool Cat XO1 2017/2018
Dear Mr Motesharrei,
Further to our previous correspondence below regarding our position in respeet of the re-imposition of sanctions
that werc lifted or waived in connection with the ICPOA (Joint Comprehensive Plan of Action), as announced
by the UIS on May 8, 2018.
we hereby notify you that the following businesscs are unfortunately impacted by this change.
O.
Catastrophe Excess of loss Reinsurance treaty entered into Bimeh Markazi Iran, Bimeh Iran, Bimeh Asia,
Bimeh Alborz and Bimeh Dana with Partner Reinsurance Europe SE French branch terminating on 22
September 2018 inclusive ("Contract Termination Date"). Hereafter, "the Contract".
•
Per Risk Excess of loss Reinsurance treaty entered into Bimeh Markazi lran, Bimeh iran, Bimeh Asia, Bimeh
Alborz and Bimeh Dana, Bimeh Parsian, Bimeh Mellat & Bimeh Saran with Partner Reinsurance Europe SE
French branch terminating on 22 September 2018 inclusive ("Contract Termination Date"). Hereafter, "the
Contract.
As a result;
Effective August 5, 2018, we will no longer be in a position to provide (re)insurance coverage for any
risks/activity types to which sanctions will be re-imposed from this date (please refer to the iren sanctions page
of the OF4AC website and in particular the [AQ for the defined activity types]. PartnerRe's (re)insurance coverage
of these particular risks/activity types, if any, will be cancelled as of August 6, 2018.
We would likc to assure you that we will do our utmost to continue to honor our contractual obligations
)garding (i) risks concerned by, but occurring prior to, that date and (i) risks which are not targeted by that
date until the Contract Termination Date, in accordance with the terms of the sanctions clause and the sanctions
regulations that apply to Partncre. It may be that third parties, for example banks, prevent us from bonoring
our obligations. We must point out that PartncrRc shall not be held responsible for the actions of third partics
which are beyond our control.
We would be grateful if you could acknowledge rcccipt by reply to this email.
With my bxs personal regards,
Antoine Gomot
Treaty Manager
P&C Middle Eest 3 Africa
Partner Reinsurance Europe SE
Succursale Fran~aise
153 re de Courcelles, 75817 Paris Cedex 17, France

- 401 -

- 402 -

Annex 174
SWIFT message from Bank Sohar to Bank Markazi, 6 August 2018

- 403 -

- 404 -

Deport Header
Applle ion;
AN'lance Message Management
Report type.
stance Sech - Detafed Re part
Opertor
w32
Alo Server islance:
an_bmj@rt
0ale. Te
2018/288 14.26.09
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3147
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000001
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wince Type ins frien1Gan
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1232 160068MJIRTHANT9972006837
Correspondent Input Retrsn ; 12021808069SHROMRUAXXX20034567
Meg~ ea@r ;t8+ L, A'±"
YE';tae
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8SHROMRLOUX
BANK SOUAR SAO.G
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Receiver;
BMJUR THINT
BANK NARKAZI JOMHO\JR! ISLAM IRAN (Centm! Bank of
INTERNATIONAL DEPARTMENT
TEHRAN IRR
r20: TrnAtIon Reference tber
COUNT CLOSURE
79 arrive
After compliments,
Thi mess»ge Is « tor) advice to your good bank
th4t Bank Sohar,due to internal bank policies,
ii be cloning its banking relationship end
•
v.
O countst
that you maintain with q,
Pease arrange to provide your Instructions 4or
the set&lament ot your final balance by xi
this Wednesday 08th oft August 201$.
w assure ytu 0I our best cooperation.
Thank you.
Best re4rd,
Financial Institutions Group
Page'ol
2

- 405 -

- 406 -

Annex 175
Letter from Chedid Re to Central Insurance of Iran, 18 September 2018

- 407 -

- 408 -

majid kazemi
From:
Sent:
Jean Wakim ([email protected]) [[email protected]]
Tuesday, September 18, 2018 1:01 AM
To:
majid kazemi; Hasan Fawaz
'hassan motesharrei'; [email protected]; 'Ahad'; [email protected]; Habib Jaalouk;
Cc:
Habib Jaalouk; Alain Bouzaid
'
Subject:
Bimeh Markhazi lran, Bimeh Iran, Bimeh Asia, Bimeh Alborz, Bimeh Dana, Bimeh Parsian,
Bimeh Mellat & Bimeh Saman - Fire , Engineering, CIS & LOP Risk XL Programme 1397/98
(2018/2019)
Dear Majid.
I hope you are well,
We deeply apologize for our late response.
Our delay was unintentional and due to the ambiguous environment the unfortunate new sct of sanctions will
have on the lnsurance and Reinsurance market. We have tried our best to find decent reinsurance capacities to
continue our long ten engagement with your esteemed company but in vain. Our security list does not allow us
0
to work with certain reinsurers for the main reason that we do not have enough evidence that they will honor
their commitments.
Given the lack of decent reinsurance capacities and the inability to
find banking channels in the near future to
honor the financial transactions. We deeply regret being unable to continue with the placement of our order on
both the Risk and Cat XL Programs.
··------
We once again regret this unfortunate outcome and wish that all these obstacles shall soon be waived and
aiming for a brighter future.
We remain at your disposal in providing any types of consultancy and knowledge sharing.
Kind Regards,
.lean
(_) .-
Jean Wakim
Treaty Division
Chedid & Associates S.A.L.
Chedid Re House, Presidential Palace Avenue. Baabda
P.0.Box 16-6515. Beirut, Lebanon
T +961 5 956080 ext. 316, M -961 79 300323
chedidre.com
A company of Chedid Capital

- 409 -

- 410 -

Annex 176
Email from UIB to Central Insurance of Iran, 24 September 2018

- 411 -

- 412 -

majid kazemi
From:
Tristan O'Brien {[email protected]) [[email protected]]
Sent:
To:
Cc:
Monday, September 24, 2018 4:37 PM
majid kazemi
'hassan motesharre'; [email protected], 'Ahadi'; [email protected]; Mohamed Kotb:
Subject:
Chems Eddine Kassali; Saeed Djalilvand; Kenrick Aldrich
RE: Bimeh Markazi lran,Bimeh lran,Bimeh Asia,Bimeh Alborz & Bimeh Dana- Fire
Engineering, CIS & LOP CATASTROPHE XL Programme 1397/98(2018/2019)
Dear Mr Kazemi,
Further to our previous correspondence and after much deliberation by our Board of Directors, we regret to
advise that due the insurmountable difficulties we are facing with the banking system, for the present time
UIB has no choice but to withdraw from the intermediation of Iranian business. We cannot in good faith be
effective reinsurance brokers when we cannot present accounts, claims, premiums for our clients.
To this end we are prepared, if you so wish, to provide you with information regarding the reinsurance
0
companies, underwriters and contact details of each reinsurer that support your programme so that you may
converse with them directly regarding the renewal of their shares for 2018/19 underwriting year.
I am sorry to bring you such news, but can only tell you that we at UIB are equally very frustrated by this
position.
With kindest regards, Tristan
Tristan 0'Brien
Accou:t Executive -- Treaty Division
United Insurance Brokers Ltd
Direct Line: +44 (020 7336 1622 { Switchboard: +44 (0)20 7488 0551 } Mobile: +44 (0)7500 446 274 ]
Facsimile: +44 (0)20 7480 5182 ] Web: ww.ibgroup.com
UIB
() Please ensure you are aware of your responsibilities under the Insurance Act 2015. Click here for our factsheet.
From: Tristan O'Brien
Sent: 19 September 2018 15:.34
To: 'majid kazemi' <[email protected]>
Cc: 'hassan motesharrei' <[email protected]>; [email protected]; 'Ahadi'
<[email protected]>; [email protected]; Mohamed Kotb <[email protected]>; Chems Eddine
Kassali <[email protected]>; Saeed Djalilvand <[email protected]>
Subject: RE: Bimeh Markazi Iran.Bimeh Iran,Bimeh Asia.Bimeh Alborz & Bimeh Dana- Fire , Engineering.
CIS & LOP CATASTROPHE XL Programme 1397/98(2018/2019)
Dear Mr Kazemi,
I can confirm your point below. ln the case of agreeing on direct payment the placement of the reinsurance, all
correspondence, the issuance of supporting documentation, claims advices and recovery processes will still be

- 413 -

- 414 -

Annex 177
Letter from J.B. Boda to Central Insurance of Iran, 24 September 2018

- 415 -

- 416 -

Motesharei
From:
Sent:
Ravi K Padmanabhan ([email protected]) <[email protected]>
Monday, September 24, 201& 10:00 AM
To:
'hassan motesharte~'
Cc:
'majid kazem»'; [email protected], [email protected], [email protected],
[email protected]; 'J 8 Boda Reinsurance Brokers Pvt Ltd'; 'Jagannath Shettigr; E
Boda Reinsurance Brokers Pvt Ltd'; J B BODA REINSURANCE BROKERS PVT LTD'; 'A D
Boda'; 'Boda, Gautam'; 'Rohit Boda'; 'JBB MUMBAI - DEEPAK SHAH';
[email protected]
Subject:
iran Business
5ala Dear Motesharrei,
In the context of the ongoing & re-imposed sanctions on Iran, we at). B, Boda have concern in offering our services to
(the Iranian Markets.
With a grief heart, we as a company are left with no option but compelled to refrain from offering our services to the
Iran market with immediate effect until the relaxation in sanctions.
We request for your kind understanding.
hod Hafez.
With Best Regards.
OjasP.Majmundar
K.Padmanabhan (Ravi)
0
Principal Officer &Sr.Executive Director Senlor Exeatlve Director
1,8.Boda Reinsurance Brokers Pvt.Ltd.
Maker Bhavan I, Sir Vithafdas Thackersey Marg
New Marine Lines, Churchgate
Mumbai 400020, India
l
J. 5. B0DA
Year
Board +912266314949 Ext.984
1943-2018
Dlrect
: +912266314984
WE EEL IEVE
Mobile : +919820617976
[email protected]
] www.ibboda.net
1

- 417 -

- 418 -

Annex 178
Email from Danske Bank to Export Development Bank of Iran (EDBI),
15 October 2018

- 419 -

- 420 -

From: Michael Jensen [[email protected]]
Sent: Monday, October 15, 2018 5:35 PM
To: sona.mottaghi
Cc: Karsten Strayberg; Sanne Sylvest; Michael Jensen
Subject: FW: Exchanging Test Key Table - Export Dev Bank of Iran
Dear Sona
Hope you are fine.
We are sorry for the confusion. CLS is a clearing system for cash
settlement in connection with FX dealing. {you can read about it here:
https://www.cls-group.com/)
We do that either with counter parties where we have agreed on that as
standard settlement instruction or we offer to be 3rd part CLS clearer
for some banks having Nordic accounts with us.
As you are aware there is a big risk that Iran will be sanctioned
again from the USA and that means, that we also will stop to do
transactions with Iran as we have chosen to be compliant with US
sanctions, in addition to those in EU and UN.
We wish you all the best. Speak to you soon.
Best regards
Michael Jensen
Senior Relationship Manager
International Financial Institutions
Danske Bank
Holmens Kanal 2-12
DK-1092 Copenhagen K
Direct Phone (+45) 45 13 66 45
Mobile (+45) 22 65 67 20

- 421 -

- 422 -

Annex 179
SWIFT message from BCP Bank to Bank Markazi, 17 October 2018

- 423 -

- 424 -

•• ASAP2 Print Instance - ASAP2_443364 (ACCESS7} Printed on 10/17/2018 7:26:59 PM
-e--------------- Instance Type and Transmission
----=----­
Original received from SWIFT
Priority
; Normal
Message Output Reference
; 1925 181017BMJIIRTHRXXX0005011511
Correspondent Input Reference
1755 181017BPCPCHGGAXXX9637294331
+or
es9are 4eafer woe-ow=i
Sift Output
: FIN 299 Free Format Message
Sender
BPCPCHGGXXX
BANQUE DE COMMERCE ET DE PLACEMENTS S.A.
GENEVA CH
Receiver BMJIIRTHXXX
BANK MARKAZI JMHOURI ISLAMI IRAN (Central Bank of
Head Office
Tehran IR
MUR : E299181017263546
-we-------- Ressafe [eyt
20: Transaction Reference Number
INTL. DIV/986/RI
21: Related Reference
CORR. ACCOUNTS
79; Narrative
ATTN: FINANCIAL INSTITUTIONS DEPARTMENT
DEAR COLLEAGUES,
AS YOU ARE ALREADY AWARE, WE WILL CEASE
INTERMEDIATING IN ALL IRAN RELATED BUSINESS FROM
NOVEMBER 4TH, 2018.
THEREFORE WE KINDLY REMIND YOU THAT WE MAY
ENCOUNTER DIFFICULTIES IN TRANSFERRING REMAINING
BALANCES ON YOUR ACCOUNTS AT BCP TO YOUR
CORRESPONDENT ACCOUNTS WITH OTHER BANKS AFTER
NOVEMBER 4TH, 2018.
E TIHANK YOU IN ADVANCE FOR PAYING ATTENTION TO
ABOVE AND FOR YOUR KIND UNDERSTANDING.
SINCERELY' YOURS
BANQUE DE COMMERCE ET DE PLACEMENTS SA
INTERNATIONAL DEPARTMENT
ewer-
[de@sate 'lR1er wee
{CK: 7DBD5385585£)
PKI Signature: MAC-Equivalent
1
I
e

- 425 -

- 426 -

Annex 180
SWIFT message from KBC Bank to Bank Markazi, 17 October 2018

- 427 -

- 428 -

++· ASAP2 Print Instance - ASAP2_443924 (ACCESS7) Printed on 10/20/2018 12:23:56 PH +»+
--
Instance Type and Transmission
Original received from SWIFT
Priority
; Normal
Message Output Reference
; 1410 181017BMJIIRTHAXXX0005011472
Correspondent Input Reference
1240 181017KR£0BEBBDXXX1899210194
w
weed¢le
el
Swift Output
: FIN 199 Free Format Message
Sender
KREDBEBBXXX /
KBC BANK NV
BRUSSELS BE
BMJIIRTHXXY
Receiver
BANK MARKAZI JOMHOURI ISLAMI IRAN (Central Bank of
Head Office
Tehran IR
ea46deed"wee
20: Transaction Reference Number
ICA/TP/ACLOSURE
79: Narrative
DEAR SIRS,
WE REGRET TO INFORM YOU THAT KBC BANK NV HAS
DECIDED TO TERMINATE THE ACCOUNT RELATIONSHIP
WITH YOUR BANK AS FROM 290CT18 AS A RESULT OF A
REVIEW OF ITS GENERAL COMMERCIAL POLICY 0N
INTERNATIONAL LEVEL.
THIS IMPLIES, AMONGST OTHER THINGS, THAT WE WILL
CLOSE YOUR EUR ACCOUNT NUMBER
EFFECTIVE 290CT18. AS FROM THAT DATE, WE MILL NO
LONGER E ABLE TO PROCESS ANY INCOMING OR
OUTGOING PAYMENTS FOR YOUR BANK ON THIS ACCOUNT.
THIS TIE FRAME WILL ALLOW YO TO CHANGE TO
ANOTHER PROVIDER FOR THE PROCESSING OF PAYMENTS,
AND TO INFORM YOUR CORRESPONDENTS OF THIS CHANGE
IN YOUR STANDARD SETTLEMENT INSTRUCTIONS.
CAN YOU PLEASE INFORM US TO WHICH CORRESPONDENT
BANK YOUR ACCOUNT CLOSING BALANCE 1S TO BE
TRANSFERRED TO?
ANY OUTSTANDING TRANSACTIONS THAT
WOULD MATURE BEYOND THAT DATE WILL BE SETTLED
ACCORDING TO YOUR NEW $SI'S.
KIND REGARDS,
KBC BANK NV
FINANCIAL INSTITOTIONS GR
UP

- 429 -
O
woo
Ms.e(@ff]«Mao
{CHK:750E818D1A78)
PKI Signature: MAC-Equivalent

- 430 -

Annex 181
Email from Bank of Gansu (China) to Export Development Bank of Iran (EDBI),
23 October 2018

- 431 -

- 432 -

Mail - [email protected]
Page I of2
Re:Top Urgent ---------------------Your Bank's Policy---------­
-------------Top Urgent
Bank of Gansu <[email protected]>
Tue 10/23/2018 6.04 AM
oalireza.rahimi <alireza.rahimi@edbiir>;
Dear Sir,
I hope you are doing well.
I am very sorry ,Due to the uncertainty of the international situation , as per our bank's internal
compliance policy, our bank will stop business with Iranian banks temporarily, and we do not know
when to restart this business, our colleague will send SWIFT message to you recently.Thank you.
with best regards
Jenna
Bank of Gansu
At 2018-10-22 1948.17, "alireza.rahimi" <[email protected]> wrote:
Dear Sir,
Greetings from EDBI
We write to inquire from you about good bank's policy and attitude toward the next month US
sanctions. So that we would be able to decide on creating new liability to you and the customers
and in general plan the relationships with your esteemed bank.
Your immediate reply is highly appreciated.
Best regards
Alireza Rahimi
International Relations Dept.
hrtps://webmail.edbi.ir/owa/
2019/15/01

- 433 -

- 434 -

Annex 182
Email from Banca Popolare di Sondrio to Export Development Bank of Iran (EDBI),
14 November 2018

- 435 -

- 436 -

Page 1of2
'
EDBl - Latest status · maryam.halili
EDBI - Latest status
l
\
Andrea Motalli <[email protected]>
I i
Dear $% 4±ram goo re:rrg.
hope n em~tins ycum god est
appeacn@re01;we;=so;ju're you1£521?sr
Wr.de wr are :nimcr
t itc: you that. untiD5 .be su:r":.5¢3n«. e wt c: be +the
regret::Ira
pc5;e tc handle an o' {in;nae' tansazr eh,p.·3ie
Aatead truncated got euternr 2cc;e ca«gessetc mrxr te
€
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betome be:er 2c zt@sere' tee&sea a2r, s a«tbe:et'ettaT
Once he pol.cats.tea«val
the 'wan:a hips tr pu·Goa En
reran at you csosa I ary soitr za.&z
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Ban: opole ccnd:
Correscert Eary
terr anal Dere1mer
.ngz:Maler Cac:a ~+
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Te ·35 0342 525163 - -2r 32G42 528:%
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mewa:z merzole.A no±mt:e 218 103
Artz'wctall «adreams;et@capo>
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Pacute +!ta
ntstoarzregate ;e corer&mg rs 2:
at. tr stets c!ou vlts sr &er
0$:14'1
haps:wwebmailedbiir/owa

- 437 -

- 438 -

Annex 183
Letter from Eximbank Hungary to Export Development Bank of Iran (EDBI),
27 November 2018

- 439 -

- 440 -

,-
srzz:g::
i
=III
ex Im
• bod
Direct.or of ate.atonal Af2it1 1lo
£xprt Development Bank of ta

- 441 -
#
2/at«o
dret, 2 November 201
with
te your lettg dated 13 O&be: 2Cit, pi¢ nr tt pr!M Huagetas mat he
relerear
olwins do sir witt regard too topeotno
me united Stte' withdreszal fro tat 215 mliate: alee rtrca, the Jon;
Comprehensive Pi of Action 9OJ bas resulted in thte rd »a «ii@ booty on tear's ans
tht largely !feet stet owned feral +ittis. ran hris have ht bee iccnetted
frame the Soity{er wcldide inter bal fiat\al t
!SE
As the Mu;arien State at! Et Mug h.wt ts sries e' tan# r te American pita
marl.et, £I, st &orgy with te t $,tiors, teloee aw ate n lwed te en: it an
Itcrbn#, buyer credit lie rmnt wtt tt (par peer;
can As $022er« i
a posit?e charge towards tent'ions 0inn, we wu mdsetntut o core:aio
».
@elern
Dre:to'
Ox!mbark Hungry Pc
1065 0ud pest, NgYmc: utz 4540.
1

- 442 -

Annex 184
SWIFT messages from Mitsubishi UFG Bank to Bank Maskan, 28 January 2019

- 443 -

- 444 -

me.Yuuu.Lu
PAGE 02
hups://10.9,4.12/swp/access7_3/messenger/reportDown load7report
3.1»b»
I
Reprint From MFA-0000-000000
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Network:
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Printer
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9589
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000001
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Instance Type and Transmission
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received from SWIFT
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Correspondent Input
0846 190128BKMNIR THAXXX7 196188208
141619012880TKJP.JTAXXX2197352632
Reference'
Mossage Header
Swift Output:
FIN 299 Free Format Message
Sender:
BOTKJPJTXXX
MUFG BANK, LTD,
(HEAD OFFICE)
TOKYO
JP
Receiver:
BKMNIRTHXXX
BANK MASKAN
(International Affairs Management)
Tehran IR
Message Text
£20: Transaction Reference Number
190250116
21: Related Reference
42$b970133
r79: Narrative
ATTN MANAGER OF REMITTANCE DEPT / COMPLIANCE DEPT.
RE YOUR MT202 VALUE JAN24 REF, 42$0970133
FOR PY824,508,894,
TODAY (JAN28) E CANCELED ABV MT2O2 BEFORE
EXECUTION AND TREATED IT AS NULL AND VOID.
REASON: DUE TO OFAC REGUIATION ND OUR BANK POLICY
HE HVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
BEST REGARDS
CASE NO.190250116 / REF TKY-I-15398
TCIRDTK HATTORI
Message Trailer
{CHK FBOA2E6EBA4E}
Ki Signature. MAC-Equivalent
End of Message
I of I
- 445 -

3.37 .»/Py­
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Repnnt From MFA-0000-000000
Possible Duplicate Delivery
APPLE
Network.
Session Holder
Printer
Session:
9591
Sequence:
000002
Delivery Status:
Network Ack
Instance Type and Transmission
Onginal
received from SWIFT
Priortty:
Normal
Message Output Reference :
Correspondent Input
Reference:
0939 190128BKMNIRTHAXXX7196188211
1509190128BOTKJPJTAXXX2197354169
Message Header
Swift Output:
Sender ;
FIN 299 Free Format Message
BOTKJP,JTXXX
MUFG BANK, LTD
(HEAD OFFICE)
TOKYO
JP
Receiver ;
BKMNIRTHXXX
BANK MASKAN
(International Affairs Management)
Tehran IR
Message Text
F20: Transaction Reference Number
19025010£
F2I: Relate Reference
42$0570132
9: NA:retie
ATTN MANAGER OF REMITTANCE DEPT / COMPLIANCE DEPT.
RE YOUR MT202 VALUE JAN24 REF. 42$0970132
FOR JPFY158,729,519.
TODBY (JAN28) WE CANCELED ABV MT2O2 BEFORE
EXECUTION AND TREATED IT AS NOLL AND VOID.
REASON: DUE TO OFAC REGULATION AND OUR BANK POLICY
E HAVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
BEST REGARDS
CASE NO.29250108 / REF TKY-1-1539¢
TCIRDT HATTORI
Message Trailor
(CHKF28582650ECC)
PKI Signature: MAC-Equivalent
End of Message
1of1
- 446 -

..
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3.7 %.be
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Session Holder;
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Network Ack
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Original
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Correspondent Input
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0038 190128BKMNIRTHAXXX7 196188209
1508190128BOTKJPJTAXXX2197354144
Reference :
Message Header
Swift Output:
Sender;
FIN 299 Free Format Message
Receiver ;
BOTKJPJTXXX
MUFG BANK, LTD.
(HEAD OFFICE)
TOKYO
BKMNIRTHXXX
BANK MASKAN
(International Affairs Management )
JP
Tehran IR
Message Text
F20; Transaction Reference Number
190250113
F2I: Related Reference
42$D970135
F79; Narrative
ATTN MANAGER OF REMITTANCE DEPT / COMPLIANCE DEPT.
RE YOUR MT2O2 VALUE JAN24 REF. 4250970135
FOR JPY438,520,000.
TODAY (JAN23) WE CANCELED ABV MT22 BEFORE
EXECUTION AND TREATED IT AS NULL AND VOID.
REASON: DUE TO OFAC REGULATION AND OUR BANK POLICY
WE HAVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
BEST REGARD
CASE NO.190250113 / REF TKY-I-15396
TCIRDTK HATTORI
Message Trailer
{CHK F33B3F2EC84C)
PKI Signature: MAC-Equivalent
End of Message
tu&/V
we
'e
1 of 1
.ii-­
- 447 -

10:29
82182932735
BEYNCLMELAL
PAGE 83
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(International Affairs Management )
Tehran IR
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F2; Transaction Reference Number
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ATTN MANAGER OF REMITTANCE DEPT / COMPLIANCE DEPT.
RE YOUR MT202 VALUE JAN24 REF. 42$0970134
FOR JPY23,008,751.
TODAY (AN24) WE CANCELED ABV MT202 BEFORE
EXECUTION AND TREATED IT AS NULL AND VOID.
REASON: DUE TO OFAC REGULATION AND OUR BANK POLICY
WE HAVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
BEST REGARDS
CASE NO.190250:07 / REF TKY-1-15392
TCIRDTK HATTORT
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ATTN MANAGER OF REMITTANCE DEPT / COMPLIANCE DEPT.
RE YOUR MT202 VALUE JAN24 REF.42$0970136
FOR FY222, 651,460.
TODAY (JAN28) WE CANCELED AB MT202 BEFORE
EXECUTION AND TREATED IT AS NULL AND VOID.
REASON: DUE TO OFAC REGULATION AND GUR BANK POLICY
WE HAVE NOT DEBITED ORIGINAL AMOUNT AND NO REFUND.
BEST REGARDS
CASE NO.190250109 / REF TKY-I-15395
TCIRDTK HATTORI
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1/28/2019 10:31 PM
- 450 -

Annex 185
Letter from the ICC to Iranian parties and to the CILA, 3 April 2019
Redacted

- 451 -

- 452 -

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- 453 -

Ly email
Centre for International Legal Affairs (CILA)
N".80, Shahid Mousavi St.,
Taleghani Ave.,
P.O. Code: 15836-36834
Tehran,
Iran
By email: cila@iripoir
Dear Mesdames and Sirs,
The Secretariat refers to the payments towards thc advance on costs in thc present matter.
, .. /. ..
- 454 -

-�----------------------P�
g-•_

- 455 -
J
•
We draw your attention to the fact that French credit institutions including those used by ICC have
progressively hardcncd their internal compliance policies and proccdures further to the full
rc-imposition of U.S. sanctions on Iran on the S of November 2018.
As a consequence, the processing of payments made directly or indirectly on behalf of Iranian lcgal or
physical persons is no longer possible at the banks level, We undcrstand that thcsc positions result from
the banks' overall commitment to limit their exposure to U.S. secondary sanctions despite the
provisions of the EU Blocking Regulation.
Considering these banking impediments, the ICC Secrctariat will not be in a position to receive the
above-mentioned payment from Respondent or to provide Respondent with its banking instructions for
further payments in this matter at this stagc.
The ICC apologizes for the inconveniencc and delay causcd to thc parties by these circumstanccs
which lic beyond its rcach,
Notwithstanding the above, pleasc note that ICC has already explored and exhausted with its banks the
possible alcmnatives which would havc allowed this case to procced further in the absence of an OFAC
guarantee authorizing the processing of payments in this mattcr.
As no further alternative is available to date at JCC's levcl, we invite Respondent to provide us with
such OF AC licensc which would allow ICC's banks to process its payments in this matter.
We.grant the Respondent [S_ days from the day following the rcccipt of this correspondcncc to
comment on the above.
Therefore, we invite Claimant to substitute for the payment of Respondent's share of the advance.
We cnclosc a Payment Request in which we grant additional time to Claimant to pay thc total of the
advance on costs. We draw Claimant's attention to the fact that the bank to be used for the payment is
now Hottinguer as indicated in the Payment rcqucst.
Should you have any query in this respect, we invite you to contact ICC's Legal Services department at
[email protected]. All other mattcrs should be submitted directly to the case management team.
Yours faithfully,
.kn&
Maria Hauser-Morel
Counsel
Secretariat of the ICC Intcmnational Court of Arbitration
encl.
• Financial Table
- Payment request (for Claimant's attention)

- 456 -

Annex 186
“Iran, SCOR SE Reach Reinsurance Agreement”, Financial Tribune, 1 October 2017

- 457 -

- 458 -

Iran, SCOR SE Reach Reinsurance Agreement
fi na ncia Itri bu ne.com/articles/economy-business-and-markets/7335 1/iran-sco r-se-rea ch-reins ur an c e-agreement
October 1, 2017
he Central Insurance of Iran, the industry's regulating body and its largest reinsurer, announced
on Thursday it has reached a much-anticipated agreement with France's SCOR SE, based on
which the major reinsurer will cover catastrophe excess of loss reinsurance for Iran.
According to a press release published on Cll's website, the agreement was finalized during a
meeting between Abdolnasser Hemmati, Cll's president, and Victor Peignet, the CEO of SCOR
Global P&C SE, after yearlong negotiations bore fruit.
No more details were provided by CII, but the agreement was hailed by insurance experts as a
watershed event for developing Iran's reinsurance business and opening the country's lucrative
insurance market to foreigners.
SCOR SE became the world's fourth-largest reinsurer in 2015, with gross written premiums
worth €13.4 billion.
Hemmati expressed his enthusiasm for the agreement hours after the announcement was
made, describing it in a tweet as an "important step toward the implementation of JCPOA in the
insurance industry'' referring to Iran's 2015 nuclear deal reached with world powers by its
initials.
Denis Kessler, the chairman of the Board of Directors and CEO of SCOR SE, also said the
agreement marked the beginning of a new era of cooperation between SCOR and Iran, and
called for enhancement of ties in other categories as well.
CII had announced earlier that it has held talks with more than 140 foreign insurance and
reinsurance companies seeking to enter the Iranian market since the lifting of sanctions in
January 2016.
Earlier in July, Munich Re, the world's largest reinsurance company signed a contract with Iran's
Saman Insurance Company, becoming the first foreign reinsurer to start working with Iran in
the post-sanctions era.
112
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Sara Haghighivand, a member of Professional Committee of High Council of Insurance, told
Financial Tribune that CII has been taking a cautious line in its negotiations with foreigners,
mainly to protect the industry from any external problems in the future.
"That's why it took nearly two years for the agreement [with SCOR] to become finalized," she
said.
During the sanctions era, all potential risks had to be covered by domestic entities and if an
incident took place, the government-backed reinsurance fund and local insurers had to bear the
costs-an inevitable scenario due to limitations imposed by sanctions.
"Currently, the Central Insurance of Iran, Iranian Re and Amin Re are the only players in Iran
reinsurance market," she said, noting that CII is the biggest of the three.
"It's important to transfer more risks to credible foreign reinsurers, since more risk is distributed
across a broader geographical area."
According to Haghighivand, working with major global players will have the benefit of
encouraging other foreign reinsurers to enter the Iranian market, especially when profit margins
are dropping elsewhere in the world.
212

- 460 -

Annex 187
“Italy’s Danieli Iranian orders blocked after U.S. decision on nuclear deal”, Reuters,
17 May 2018

- 461 -

- 462 -

Italy's Danieli Iranian orders blocked after U.S. decision
on nuclear deal
6 reuters.com/article/us-danieli-iran-sanctions/italy s-danieli-iranian-orders-blocked-after-u-s-decision-on-nuclear-deal­
idUSKCN1II1NL
MILAN (Reuters) - Italian steel manufacturer Danieli has halted work on finding financial
coverage for orders it won in Iran worth 1.5 billion euros ($1.8 billion) following the U.S.
withdrawal from the 2015 Iran nuclear deal.
"With the withdrawal of the U.S. from the treaty the banks are no longer ready to fund
Iranian projects for fear of secondary sanctions," Danieli CEO Alessandro Trivillin said on
Thursday.
In 2016 Danieli signed a framework commercial agreement with Iran worth about $5.7
billion.
Reporting by Giancarlo Navach, writing by Stephen Jewkes
Our Standards:The Thomson Reuters Trust Principles.
1/1

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- 464 -

Annex 188
A. Cremer, “Germany’s DZ Bank to halt Iran transactions in July”, Reuters,
18 May 2018

- 465 -

- 466 -

UPDATE 1-Germany's DZ Bank to halt Iran transactions in July
reuters.com/article/germany-iran-dz-bank/update-1-germanys-dz-bank-to-halt-iran-transactions-in-july-idUSLSN1 SPSN8
BERLIN, May 18 (Reuters) - Germany's No. 2 lender DZ Bank said on Friday it will suspend
financial transactions with Iran in July following U.S. President Donald Trump's pullout from the
nuclear deal with Tehran.
Trump's withdrawal of the United States from the accord and his order that sanctions be
reimposed have led several European companies to announce their exit from Iran, including
French oil major Total earlier this week.
"We will completely suspend our foreign payment transactions related to Iran starting July 1st,"
said a spokesman for Frankfurt-based DZ Bank, which is the umbrella organization of German
cooperative bank chain Raiffeisen-Volksbanken.
Germany's export credit insurer Euler Hermes AG said on Friday it has guaranteed exports to
Iran worth 200 million euros ($235.46 million) since 2016. The programme remains in place for
now and companies can still apply guarantees, Hermes said.
European powers have vowed to keep the 2015 nuclear deal alive without the United States by
trying to keep Iran's oil and investment flowing, but have admitted they would struggle to
provide the guarantees Tehran seeks. ($1 = 0.8494 euros) (Reporting by Riham Alkousaa and
Caroline Copley; Writing by Andreas Cremer; Editing by Adrian Croft and Alexander Smith)
Our Standards:The Thomson Reuters Trust Principles.
111

- 467 -

- 468 -

Annex 189
N. Verma, “Indian banks ask exporters to close Iran deals due to sanctions”, Reuters,
29 May 2018

- 469 -

- 470 -

Indian banks ask exporters to close Iran deals due to sanctions
re u te rs.com/article/india-ir an/indi an-ban ks-ask-exporters-to-close-ira n-dea ls-due-to-sanctions-id U Sl3N 1 T04A5
NEW DELHI, May 29 (Reuters)- Two Indian banks have asked exporters to complete their
financial transactions with Iran by August in response to the threat of new U.S. sanctions,
according to the country's main exporters' organisation and bank letters seen by Reuters.
U.S. President Donald Trump earlier this month pulled out of the 2015 nuclear accord with Iran
and ordered the reimposition of U.S. sanctions.
India and Iran have long-standing political and commercial ties, but New Delhi has been careful
to not fall foul of U.S. sanctions on Iran.
The Federation of Indian Exporters Organisation (FIEO) said lnduslnd and UCO, the two banks
facilitating exports to Iran, had set August 6. as the deadline for winding up deals.
"Indusind and UCO bank are telling exporters that you complete all Iran business by August 6,"
Ajay Sahai, director general of FIEO, told Reuters.
Indian exporters mostly receive payments in rupees for exports to Iran, under a mechanism
devised in 2012 when banking channels were restricted due to the U.S. sanctions.
India, Iran's top oil customer after China, had implemented a barter-like scheme that allowed it
to make some oil payments to Tehran in rupees through UCO Bank.
lnduslnd Bank in a May 24 letter, seen by Reuters, asked Indian exporters to provide a
declaration from customers that the entire export LC (letter of credit) transaction would be
completed before August 6, 2018.
An Indian exporter executing Iranian orders worth 90 million rupees said he was worried
because he would get some payments in the second half of August.
"How does an exporter feel safe? I don't know whether I will get my money or not," said the
exporter, who did not wish to be identified. He said payment for an Iranian export order
normally takes between one to one-and-a-half months.
Indian companies receive payments for exports to Iran using the oil payments held in rupee
balances at UCO.
The mechanism helped India to narrow its trade deficit with Iran from about $11.3 billion in
2011/12 to about $3.5 billion in 2015/16, when the Iran sanctions were lifted.
In the fiscal year to March 2017, India's trade deficit with Iran widened to $8.24 billion, according
to the government data.
112
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UCO Bank told the exporter mentioned above that payment would be made only if the Iran
account had enough money.
"Payments will also be subjected to any trade restrictions/currency restrictions being put in
place by U.S.A. post 08-05-2018 and as per the Government of India guidelines on the date of
claim," UCO said in its letter to the exporter dated May 29, which was seen by Reuters.
UCO Bank chairman R. K. Takkar told Reuters his bank was continuing with the rupee
mechanism. He refused to elaborate on the letter issued by his bank, and said Iran had 18
billion rupees in its account with UCO.
Reporting by Nidhi Verma; Editing by Sanjeev Miglani. Editing
by Jane Merriman
Our Standards:The Thomson Reuters Trust Principles.
212

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Annex 190
J. Saul, “Swiss Bank BCP says halts all new business with Iran”, Reuters, 29 May 2018

- 473 -

- 474 -

Discover Thomson Reuters
Directory of sites Login Contact Support
i
; REUTERS wore Business Marets Pourucs Tv Q

- 475 -
i
FINANCIALS MAY 29, 2018 / 1-11PM / 8 MONTHS AGO
Swiss bank BCP says halts all new
business with Iran
1MIN READ
w f
LONDON, May 29 (Reuters) - Swiss lender Banque de Commerce et
de Placements (BCP) has suspended new transactions with Iran and
is winding down activities with the country after U.S. President
Donald Trump's pullout from the nuclear deal with Tehran, the bank
said on Tuesday.
"We have suspended any new transaction related to Iran after May 8,
2018 and started the 'wind down period' within the framework of
OFAC announcement," the bank said in a emailed statement to
Reuters, referring to the U.S. Treasury's sanctions enforcement arm.
Trump's withdrawal from the accord on May 8 was announced in
tandem with the re-imposition of U.S. sanctions within 180 days,
prompting several European companies to announce their exit from
Iran. (Reporting by Jonathan Saul; Editing by Adrian Croft)
Our Standards: The Thomson Reuters Trust Principles.

- 476 -

Annex 191
J. Saul, “Belgium’s KBC to limit Iran transactions after U.S. sanctions move”,
Reuters, 7 June 2018

- 477 -

- 478 -

Belgium's KBC to limit Iran transactions after U.S. sanctions move
re u te rs.com/ article/us-iran-bank i ng-kbc/belgium s-k bc-to-lim it-i ran-transactions-a fte r-u-s-sa nctio ns-move-idUSK CN 1 J3213
LONDON (Reuters) - Belgium's KBC (KBC.BR) will limit Iran-related transactions to only
humanitarian trade after the U.S. decision to reimpose sanctions on Tehran, the financial group
said, becoming the latest company to scale back activities.
U.S. President Donald Trump pulled out of an international nuclear deal with Iran - known as the
JCPOA - on May 8 and said he would reimpose sanctions within 180 days, prompting several
European companies to announce they would end business with Tehran before the Nov. 4
deadline.
Since then, banks, insurers, shipping companies and European oil refiners have been gradually
severing ties with Iran, complicating the efforts of European and other countries to keep the
nuclear deal alive.
"Immediately upon the exit by the USA of the JCPOA, KBC Group decided to restrict its policy on
Iran to humanitarian goods as defined by OFAC," the company said in an emailed statement to
Reuters, referring to the U.S. Treasury's sanctions enforcement arm.
"This policy allows also such humanitarian transactions for KBC's own customers beyond the 4th
of November 2018 as long as it complies with OFAC programs."
KBC said pending transactions for goods other than humanitarian trade would be wound down
within the allowed period.
"KBC never financed any deal with Iran but only processed the settlement of transactions of its
customers, taking into account all applicable EU and OFAC sanctions and several other specific
conditions," it said.
International sanctions were lifted in 2016 as part of an agreement to limit Iran's nuclear activity.
The easing of measures included the removal of some sanctions by the United States such as on
Iran's financial sector.
KBC, which is an integrated bank-insurance group, said it previously decided in 2016 to support
well established customers in home markets in Belgium, the Czech Republic, Slovakia and
Hungary "in their genuine trade with Iran, always respecting all EU and U.S. regulations".
"Such support is/was restricted to non-U.S. dollar trade only and always subject to an in-depth
screening of each transaction and all parties concerned."
Kenni Leth, group press officer with Denmark's largest lender Danske Bank (DANSKE.CO), said
earlier this year the bank had decided to phase out and exit all activities to and from Iran and
suspend existing relations with Iran that allowed it to support certain customers in doing
business there.
112
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"During recent months the operational and reputational risks associated with doing business in
Iran have increased," Leth said.
Last week, Swiss lender Banque de Commerce et de Placements (BCP) told Reuters it had
suspended new transactions with Iran and was winding down Iran-related activities, which
finance sources said was a blow for Tehran.
Germany's No.2 lender DZ Bank said last month it would halt financial transactions with Iran in
July.
Sanctions specialists say humanitarian business with Iran, which includes the food and medicine
trade, was never barred before 2016, but the complexities involved made such activity slow
paced due to concerns over dealing with sanctioned entities, together with a ban on U.S. dollar
dealings.
Additional reporting by TeisJensen in Copenhagen, Editing by Mark Potter
Our Standards:The Thomson Reuters Trust Principles.
212

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Annex 192
K. Knolle & A. Schwarz-Goerlich, “Austria’s Oberbank withdraws from Iran”,
Reuters, 13 June 2018

- 481 -

- 482 -

Austria's Oberbank withdraws from Iran
reuters.com/article/us-oberbank-iran/austrias-oberbank-withdraws-from-iran-idUSKBN1J926D
VIENNA (Reuters) - Austria's Oberbank (OBER.VI) will withdraw from Iran because of
increased risk for European companies in light of potential U.S. sanctions, it said on
Wednesday.
Oberbank signed a deal with Iran in September, enabling it to finance new ventures
there. It was one of the first European banks to do so since Tehran struck a nuclear deal
with six major powers in 2015 and many sanctions were lifted.
However, the outlook has changed after U.S. President Donald Trump pulled the United
States out of the pact last month and said he would reimpose sanctions.
Although the European Union signatories have said they want to keep the deal in place,
many companies have voiced their concern over the increased risk of conducting
business in Iran.
"Oberbank has supported numerous clients and their Iran business in the past two
years," Oberbank said on its website. "The threat posed to European companies by U.S.
secondary sanctions is forcing us to retreat."
The lender had already taken the precautionary measure of placing its Iranian financing
projects on hold. It now says that transactions and letters of credit related to Iran will be
provided exclusively for contracts signed before May 8.
The bank said it advises its customers to conclude Iran-related transactions promptly
and that payments are likely to be impossible from Nov. 4.
Reporting by Kirsti Knolle and Alexandra Schwarz-Goerlich; Editing by David Goodman
Our Standards:The Thomson Reuters Trust Principles.
1/1

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- 484 -

Annex 193
“India’s top bank to stop handling Iran oil payments”, India Economic Times, 15 June
2018

- 485 -

- 486 -

India's top bank to stop handling Iran oil payments:
Refiner
ET economictimes.indiatimes.com/industry/energy/oil-gas/india-stares-at-iranian-oil-supply-hit-as-sbi-stops­
payments/articleshow/64597020.cms
June 15, 2018
Reuters]
Updated: Jun 15, 2018, 03.00 PM 1ST
Untitled-11
Iran offers Indian refiners a 60-day credit period on oil sales, which means payment for
cargoes loaded from end-August will be due in November.
India's imports of Iranian oil may be hit from end-August after the State Bank of India
informed refiners it will not handle payments for crude from Tehran from November
onwards, the finance chief of Indian Oil Corp (IOC) said on Friday.
The move by the state-controlled bank, India's biggest, comes after U.S. President Donald
Trump pulled out of an international nuclear deal with lran last month, pledging to reimpose
tough sanctions within 180 days.
"(Oil) loading will be affected from end-August under the current mechanism unless a new
payment route is established," IOC's A.K. Sharma told Reuters in a telephone interview.
Although New Delhi had cut imports from Tehran in 2017/18 due to a dispute over a giant
gas field, Iran remained its third-biggest oil supplier. Iran supplied about 458,000 barrels
per day (bpd), or about a tenth of India's more than 4.5 million bpd of imports, in the fiscal
year to March 2018.
IOC previously said it would look at buying oil from traditional suppliers mostly in the Middle
East to compensate for any cut in supplies from Iran related to U.S. sanctions.
,S,fil didn't immediately respond to requests for comment.
India's refiners currently use SBI and Germany-based Europaeisch-lranische Handelsbank
AG (EIH) to buy Iranian oil in euros, according to IOC and other companies.
Mumbai-based refiner Reliance Industries Ltd, owner of the world's biggest refining
complex, plans to halt oil imports from Iran, while Rosneft-promoted Nayara Energy has
started cutting purchases from this month, sources previously told Reuters.
India, Iran's top oil client after China, was one of the few nations that continued to trade with
Tehran during a previous round of Western sanctions.
The South Asian nation has said it does not follow U.S. sanctions, but companies and
banks with links to the U.S. financial system could face penalties if they do not comply.
Some sanctions take effect after a 90-day "wind-down" period ending on Aug. 6, and the
rest, notably affecting the petroleum sector, after a 180-day period ending on Nov. 4.
1/3
- 487 -

Iran offers Indian refiners a 60-day credit period on oil sales, which means payment for
cargoes loaded from end-August will be due in November.
More Discounts?
Analysts feel Iran may have to offer more incentives to protect its oil sales to India.
"Indians may ask Iran for more discount in exchange for early payment for oil purchases
instead of a 60-day credit period," said Sri Paravaikkarasu, head of East of Suez Oil at
consultancy FGE.
Indian state-refiners previously drew up plans to almost double oil imports from Iran, which
had offered deep discounts on shipping of crude.
IOC was aiming to lift as much as 180,000 bpd from Iran in 2018/19.
Seeking to safeguard oil imports from Iran and scout for alternate payment avenues, an
Indian delegation last week visited officials and bankers in France, Germany, Britain and
the European Union's Brussels base.
"That visit was only exploratory in nature ... we are still watching the situation," India's oil
minister Dharmendra Pradhan told Reuters earlier this week.
As well as banks, shipping firms and insurance companies have already begun distancing
themselves from Iran.
IOC's Sharma said his firm received very few responses to inquiries on hiring tankers to
import Iranian oil.
"Only NITC (National Iranian Oil Company) and a few others participated," he said, adding
freight rates for transportation of Iranian oil have also gone up due to the threat of
sanctions.
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- 488 -

Annex 194
“OECD Downgrades Iran Credit Rating”, Financial Tribune, 1 July 2018

- 489 -

- 490 -

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« Economy, Business And Markets (9 July 01, 2018 19:50
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OECD Downgrades
Iran Credit Rating
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OECD Downgrades Iran Credit Rating
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Today's Top
Stories
T
he Organization for Economic Cooperation
and Development (OECD) downgraded Iran's
rating in the country risk classifications of
the Participants to the Arrangement on Officially
Supported Export Credits (CRE) from 5 to 6, following a
meeting held on June 26.
70% Rise
in Iran's
I
Non-Oil
Increase in the convertibility and transfer risk as the
results of the controversial decision made by the US
administration on re-imposing sanctions on Iran could
be the main reason behind OE CD's decision, experts
familiar with the issue told the Financial Tribune.
Exports
The measure is raising concern over European Union's
ability to meet its commitments towards Iran following
the US decision to unilaterally abandon the 2016
nuclear agreement.
to Sri
Lanka
In May, EU foreign policy chief, Federica Mogherini said
https://financialtribune.com/articles/economy-business-and-...
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- 491 -

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https://fnancialtribune.com/node/89069
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Republishing Guidelines
3
a Four Phases
of Iran's South
that the EU was preparing a nine-point economic plan
Pars Gas
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2 sur 2

- 492 -

Annex 195
O. Tsukimori & T. Aranaka, “Japanese bank MUFG, Mizuho to stop Iranian
transactions”, Reuters, 12 July 2018

- 493 -

- 494 -

Japanese banks MUFG, Mizuho to stop Iranian transactions
reuters.com/article/us-japan-ir an-mufg/japanese-banks-mufg-mizuho-to-stop-iranian-transactions-idUSKBN1 K20X0
TOKYO (Reuters) - Japanese banks are moving to stop handling all Iran-related transactions to
meet a November deadline set by the United States, after President Donald Trump in May
pulled out of a nuclear program agreement with Tehran.
Japan's biggest bank, Mitsubishi UFJ Financial Group Inc (MUFG) (8306.1), will halt all Iran
transactions to comply with the reimposition of U.S. sanctions against Tehran later this year,
according to a document seen by Reuters on Thursday.
The banking unit of Mizuho Financial Group Inc (8411.T) said later on Thursday it would take the
same action. Sumitomo Mitsui Banking Corp (SMBC) (8316.T) will carefully consider its response
in compliance with the law and based on U.S. sanctions, it said in a statement emailed to
Reuters.
The move by MUFG is likely force a halt in Iranian crude oil purchases by Japanese companies as
its banking unit handles the bulk of those imports, industry sources have told Reuters.
The bank was fined hundreds of millions of dollars in 2014 for misleading U.S. regulators about
its transactions with sanctioned countries including Iran.
"The bank is afraid of U.S. sanctions, so cannot handle trade transactions. Other Japanese banks
are likely to be in the same position," said a Japanese analyst who declined to be identified due
to the sensitivity of the issue.
Trump in May withdrew the United States from a multi-party deal on Iran's nuclear program and
ordered the reimposition of U.S. sanctions against Tehran that were suspended under the 2015
agreement.
Washington later told countries to stop buying Iran's crude oil, that nation's most important
export item, by Nov. 4 or face financial consequences.
Japan is one of the biggest buyers of Iranian crude but the country's oil refiners have said they
may have to stop loading Iranian crude oil from October if they cannot get an exemption from
U.S. sanctions to allow imports to continue.
Beyond oil, trade between Japan and Iran is minimal.
MUFG Bank Ltd [MTFGTU.ULJ has informed customers in Japan about its decision, given that
dealings with Iranian financial institutions will be prohibited after a 180-day wind-down period,
which ends on Nov. 4, the document showed.
MUFG may revise its policy should additional guidance be given by the United States, the bank
said in the document.
112
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MUFG did not immediately respond to a request for comment.
(GRAPHIC: Iran crude oil exports to major Asian clients in H1 2018 - reut.rs/2Nlum8v)
Reporting by Osamu Tsukimori and Taiga Uranaka; Writing by Aaron Sheldrick; Editing by
Jacqueline Wong, Christopher Cushing and David Evans
212

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Annex 196
I. Landauro, “Scor says will not sign or renew Iran contracts”, Reuters, 13 July 2018

- 497 -

- 498 -

Discover Thomson Reuters
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tie
ii%, REUTERS wortad Business Markets Pouts Tv Q
FINANCIALS
JULY 13, 2018/ 2:43 PM / 7 MONTHS AGO
Scor says will not sign or renew
Iran contracts
1 MIN READ
w f
PARIS, July 13 (Reuters) - French reinsurer Scor SE said on Friday it
will not sign new contracts in Iran or renew existing deals because of
U.S. sanctions against the country.
"Given he current situation, Scor does not intend to write or renew
any Iranian business," a company spokeswoman said on Friday.
(Reporting by Inti Landauro Editing by Laurence Frost)
Our Standards: The Thomson Reuters Trust Principles.
SPONSORED

- 499 -

- 500 -

Annex 197
R. Lough & I. Landauro, “U.S. rejects French request for Iran exemptions as
reinsurer Scor pulls out”, Reuters, 13 July 2018

- 501 -

- 502 -

U.S. rejects French request for Iran exemptions as reinsurer Scor
pulls out
reuters.com/article/us-iran-nuclear-francelu-s-rejects-french-request-for-iran-exemptions-as-reinsurer-scor-pulls-out­
idUSKBN1 K30TF
PARIS (Reuters) - The United States has rejected a French request for waivers for its companies
operating in Iran that Paris sought after President Donald Trump imposed sanctions on the
Islamic Republic, French Finance Minister Bruno Le Maire told Le Figaro.
Paris had singled out key areas where it expected either exemptions or extended wind-down
periods for French companies, including energy, banking, pharmaceuticals and automotive.
Officials had expressed little hope for securing the waivers, which were critical for oil and gas
major Total (TOTF.PA) to continue a multibillion-dollar gas project in Iran and for carmaker PSA
Group (PEUP.PA) to pursue its joint venture.
French reinsurer Scor SE (SCOR.PA) said on Friday it will not seek new contracts or renew
existing business in Iran, given the U.S. sanctions.
Most international insurers in Iran are working with the shipping and energy industries in the
country.
"We have just received Treasury Secretary Steve Mnuchin's response: it's negative," Le Maire told
Le Figaro in an interview published on Friday.
Le Maire said Europe needed to react quickly and protect its economic sovereignty.
"Europe must provide itself with the tools it needs to defend itself against extra-territorial
sanctions," Le Maire added.
Washington announced in May it was imposing new economic penalties on Tehran after pulling
out of a multilateral 2015 agreement, under which Tehran had agreed to curb its nuclear
activities in return for sanctions relief.
Trump's sanctions are aimed at pressuring Iran to negotiate a new agreement to halt its nuclear
programs that might include Tehran's regional activities and ballistics development. In
particular, Washington wants to curtail the oil exports that are key to Iran's economic revival.
Earlier this month, Iranian President Hassan Rouhani appeared to threaten to disrupt oil
shipments from its neighbors if Washington pressed ahead with trying to force countries to stop
buying Iranian oil.
Reporting by Richard Lough and Inti Landauro, editng by Larry King and Laurence Frost
111

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- 504 -

Annex 198
“Iran sanctions hurt French cattle farmers”, RFI, 9 August 2018

- 505 -

- 506 -

Iran sanctions hurt French cattle farmers
en.rfi.fr/france/20180809-iran-sanctions-hurt-french-livestock-exports
RFI
August 9, 2018
Thousands of French cows set to be exported to Iran are now stuck on the ground in north­
western France, AFP reports, just days after the first tranche of US sanctions against the
Middle Eastern country took effect.
Seamorgh, an Iranian poultry farm chain, had signed a deal with cattle farmers in France's
Normandy region in 2016 when the Iran nuclear deal was still intact, according to AFP. The
company's goal: import between 10,000 to 20,000 calves per year, mostly of the
Charolaise breed, to fatten them up and send them to Iranian slaughterhouses.
The contract was signed for "ten of fifteen million euros", according to French Senator
Nathalie Goulet. Goulet, who represents parts of Normandy, had worked to get the contract
signed for the farmers in her region.
The livestock imports would have been Iran's first since the country's Islamic Revolution in
1979, according to AFP.
Now, Goulet fears the project - which sought to "create a quality beef industry in the Middle
East" -- may have to be "abandoned".
Shattered hopes
A first "test" export in October 2017 saw more than 300 young calves successfully
transported to Iran by plane.
1/2
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"The calves were bought for the same price as in France," AFP quotes Anne-Marie Denis,
president of the rural FDSEA farmers' union, as saying. "The deal represented a significant
opportunity for cattle raisers.
"We were even envisioning exporting other products further down the line", she said,
including "cattle feed and processed meat".
But these trade dreams were slashed when US President Donald Trump pulled out of the
Iran nuclear deal in May. The withdrawal was followed by his administration's decision to
re-impose sanctions, which penalise foreign companies or governments for doing business
in Iran.
Not wanting to risk stiff financial penalties, the French banks backing the Norman contract
are now "refusing Iranian money", Goulet said. The rural cooperative Agrial, which had
been tasked with gathering the cows from the various farms for export, has withdrawn from
the project. And the insurance company responsible for covering the export costs has said
"it won't be able to continue", according to Goulet.
"We now find ourselves with no bank and no logistical support," she said. "We're at the
mercy of Trump's whims."
The senator has denounced "the extraterritoriality of American law, and has called for the
EU to defend its economic interests.
The EU, which still adheres to the landmark 2015 nuclear pact, has promised to take steps
to protect European firms dealing with Iran. But the uncertainty has already prompted many
businesses to pull out of the country for fear of US penalties.
2/2

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Annex 199
“Taiwan’s Mega Int'l Commercial Bank plans to end Taiwan-Iran clearing
mechanism after Nov”, Reuters, 13 August 2018

- 509 -

- 510 -

REFILE-Taiwan's Mega Int'l Commercial Bank plans to end Taiwan­
Iran clearing mechanism after Nov - sources
reuters.com/article/taiwan-iran-mega-bank/refile-taiwans-mega-intl-commercial-bank-plans-to-end-taiwan-iran-clearing­
mecha n ism-after-nov-Sou rces- id U SB9N 1 UY00 P
(Fixes dateline formatting)
TAIPEI, Aug 13 (Reuters) - Taiwan's Mega International Commercial Bank plans to terminate its
payment clearing mechanism between Taiwan and Iran after November in a response to the
United States' sanctions on Iran, three people familiar with the matter said on Monday.
"Our business with Iran is too sensitive, and we should no longer get involved in it," an official
from the bank told Reuters, adding that the bank has informed clients the payment clearing
mechanism is likely to be terminated after November.
New U.S. sanctions on Iran have taken effect last week despite pleas from Washington's allies,
with the U.S. President Donald Trump saying companies doing business with Iran will be barred
from the U.S. (Reporting by Taipei Newsroom; Editing by Vyas Mohan)
Our Standards:The Thomson Reuters Trust Principles.
111

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- 512 -

Annex 200
C. Aizhu & S. Zhang, “As U.S. sanctions loom, China’s Bank of Kunlun decision to
stop receiving Iran Payments - sources”, Reuters, 23 October 2018

- 513 -

- 514 -

Exclusive: As U.S. sanctions loom, China's Bank of Kunlun to stop
receiving Iran payments - sources
reuters.com/article/us-china-ir an-banking-kunlun-exclusive/exclusive-as-u-s-sanctions-loom-chinas-bank-of-kunlun-to-stop­
receiving-ir an-payments-sources-idUSKCN 1MX1KA
BEIJING (Reuters) - Bank of Kunlun Co, the key Chinese conduit for transactions with Iran, is set
to halt handling payments from the Islamic Republic under pressure of imminent U.S. sanctions
against the country, four sources familiar with the matter told Reuters.
Kunlun, the main official channel for money flows between China and Iran, has verbally
informed clients that it will stop accepting yuan-denominated Iranian payments to China from
Nov. 1, said the sources, who include external loan agents and business officials who trade with
Iran.
The bank, controlled by the financial arm of Chinese state energy group CN PC [CNPC.UL], had
already quietly suspended euro-denominated payments from Iran in late August, the four
sources said, declining to be named due to the sensitivity of the matter.
Kunlun did not respond to an emailed request seeking comment. A CNPC spokesman declined
comment.
It was not immediately clear how long the suspension of services will last and how Chinese
businesses still selling goods or services to Iran would be able to receive payment. It was also
not clear whether the bank's services settling China's payments for Iranian oil purchases would
be affected.
China is the top buyer of Iranian oil and nearly all of its oil payments go through Kunlun. China
had been buying some $1.5 billion worth of oil each month from Iran as recently as September.
But state refiners have since October been scaling back oil purchases from Iran to comply with
looming U.S. sanctions, oil industry sources have said.
The previously unreported moves by Kunlun highlight the mounting pressure Beijing faces as
Washington reimposes sanctions targeting Iran's financial and oil sectors from early November.
"A Kunlun account manager told us payments from Iran made after that date will be rejected
and returned," said one of the sources, an agent who serves as a go-between for the bank and
corporate borrowers.
"Whether and when to resume the services depends on the international situation after the
sanctions start on Nov. 5," said another one of the sources, a businesswoman, citing a WeChat
message from her trade agent recounting what she had heard from Kunlun. The agent urged
her in the message to hurry up payment collections, the person said.
113
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The new round of U.S. sanctions aims to force Tehran to stop its involvement in regional
conflicts in Syria, Yemen and Iraq and halt its ballistic missile program, after President Donald
Trump abandoned a 2015 deal between Iran and six world powers aimed at curbing Tehran's
nuclear plans.
China has said it is opposed to any unilateral sanctions and has defended its commercial ties
with Tehran.
"IRAN CONNECT"
Kunlun was established in 2006 as a city commercial bank in Karamay, an oil-producing hub in
China's far-western Xinjiang region.
CNPC became its major shareholder in 2009 through a capital injection in a bid to expand its oil
financing business. Kunlun is now 77.09 percent owned by CNPC Capital (000617.SZ), the bank's
latest annual report shows.
Early this decade, Kunlun was chosen by Beijing as its main bank to process billions of dollars in
oil payments to Iran, shielding other banks from penalties under Western sanctions that ran
between 2010 and 2015.
The U.S. Treasury sanctioned Kunlun in 2012 for conducting business with Iran and transferring
money to an entity linked to Iran's Revolutionary Guards.
The lender has nearly 30,000 corporate clients, largely state-owned enterprises and oil firms, its
annual report said. One of its flagship products is called "Yi Lu Tong'', meaning "Iran Connect",
the bank said in its annual report.
The 2012 U.S. sanctions barred Kunlun from directly accessing the U.S. financial system. Most of
the bank's transactions are conducted in yuan and euros.
Two of the sources said Kunlun's moves to suspend euro settlement in August and yuan starting
next month were triggered by U.S. sanctions. They did not give further details.
'We were told that from Nov. 1 Kunlun would no longer receive payments from Iran. That
basically means Iran will have to stop importing from China," said an executive with an eastern
China-based manufacturer that exported electronic components to Iran until recently.
China's exports to Iran totaled $16.4 billion in 2016, the latest year for which data is available,
while imports totaled $14.8 billion in 2016, down one-third from the record $24.3 billion in
exports and $27.5 billion in imports posted in 2014, according to data from China's National
Statistical Bureau.
Most of what China imports from Iran is oil.
213
- 516 -

Kunlun had 317.5 billion yuan ($46 billion) in assets at the end of last year, and reported annual
revenue at 5.4 billion yuan and net profits of 2.97 billion yuan.
($1 = 6.9411 Chinese yuan renminbi)
Reporting by Chen Aizhu and Shu Zhang; Editing by Alex Richardson
313

- 517 -

- 518 -

Annex 201
“What SWIFT is and why it matters in the US-Iran spat”, Al Jazeera News,
5 November 2018

- 519 -

- 520 -

What SWIFT is and why it matters in the US-Iran spat
aljazeera.com/news/2018/1 1/swift-matters-iran-spat-181105172906627.html
US Treasury Secretary Steven Mnuchin told reporters that SWIFT could get slapped with
sanctions if it provides services to Iranian banks blacklisted by Washington [Atta Kenare/AFP]
The Belgium-based Society for Worldwide Interbank Financial Communications (SWIFT) financial
messaging service announced on Wednesday it was suspending access for some Iranian banks
"in the interest of the stability and integrity of the wider global financial system".
The move came after the United States reimposed oil and financial sanctions against Iran,
significantly turning up the pressure on Tehran in order to curb its alleged missile and nuclear
programmes.
Last week, US Treasury Secretary Steven Mnuchin told reporters that SWIFT could get slapped
with sanctions if it provides services to Iranian banks blacklisted by Washington.
What is SWIFT?
A Belgian-based messaging platform that facilitates cross-border payments.
The member-owned cooperative connects more than 11,000 banks, financial institutions
and corporations in more than 200 countries and territories around the world.
What is it not?
It's not a bank, it doesn't hold money or manage it. It neither initiate transfers nor clears or
settles payments.
Why is SWIFT important?
Think of SWIFT as the central nervous system of international financial transactions. The
messaging platform enables financial institutions to send, receive and track information
about financial transactions in a secure and standardised way that facilitates the smooth
flow of funds across borders.
What happens to a country when its banks get cut off from SWIFT?
It can be crippled financially because money transfer information can't be forwarded to its
banks.
When a country's banks are cut off from SWIFT, it can't pay for imports and can't receive
payment for exports.
112
- 521 -

What happened to Iran when it was cut off from SWIFT in 20127
In March 2012, SWIFT agreed to not forward messages to any Iranian bank or individual
that had been blacklisted by the EU.
As a result, Iran's oil exports plunged from around 2.5 million bpd in 2011 to around one
million bpd by 2014.
The 2012 SWIFT ban was widely seen as instrumental in bringing Iran to the negotiating
table which led to the 2015 Iran-nuclear deal.
When Iranian banks were reconnected to SWIFT following the 2015 Iran-nuclear deal, oil
exports increased again.
How often are countries kicked out of SWIFT?
Rarely. SWIFT cut off a handful of North Korean banks last year.
Does SWIFT have to do what the US wants?
No. It describes itself as "a neutral global cooperative".
But there could be consequences if it resists US pressure to cut off Iran again. Richard
Goldberg, senior adviser at the Foundation for Defense of Democracies, a think-tank,
argued in this blog that in 2012, Congress authorised any president to impose sanctions
on SWIFT'S board of directors (which includes executives from some of the world's biggest
banks) if it refused to disconnect Iranian banks blacklisted by Washington.
SOURCE:
Al Jazeera News
212

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Annex 202
S. Evans, “AIG winds down underwriting linked with Iran to comply with U.S.
sanctions”, Reinsurance News, 7 November 2018

- 523 -

- 524 -

AIG winds down underwriting linked with Iran
to comply with U.S. sanctions - Reinsurance
News
7th November 2018 - Author: Steve Evans
Insurance giant American International Group (AIG) has said that it is winding down
all underwriting activities in Iran, that was undertaken by Validus and AIG entities, due
to the imposition of U.S. sanctions against the country.
AIG
AIG acquired the Validus global insurance and reinsurance business recently and it
included some underwriting of specialty lines in Iran.
With Iran now the subject of U.S. sanctions, AIG has disclosed the extent of operations
involving writing insurance for Iranian entities and said these are being wound down.
AIG said that some of Validus' non-U.S. subsidiaries underwrite marine hull, war and
cargo policies for shipowners that deliver cargo to and from Iran, including the
transport of crude oil from Iran to other countries and the transportation of refined
petroleum to Iran.
In addition, AIG said that some of Validus' non-U.S. subsidiaries also underwrite
business that provides excess ofloss reinsurance coverage which includes protection for
certain other specialty lines risks involving Iran.
U.S. sanctions targeting Iran's oil, banking and transportation industries were imposed
as of Monday 4th November and insurers and reinsurers have been making
preparations for this, with the winding down of activities.
AI G's filing confirms that the company is shuttering all activities involving underwriting
that could contravene the sanctions and said that the profit contribution from these
activities had been de minimis.
https://www.reinsurancene.ws/aig-winds-down-underwriting-.
I sur I

- 525 -

- 526 -

Annex 203
“Marine: International Group of P&I Clubs warns about insurance cover for Iranrelated
shipping”,
Asianinsurancereview.com,
29
November
2018

- 527 -

- 528 -

Marine:lnternational Group of P&I Clubs warns about insurance
cover for Iran-related shipping
asiainsurancereview.com/NewsNiew-Newsletter-Article/id/44994/Type/MiddleEast/Marine-lnternational-Group-of-P-1-Clubs­
warns-a bout-insu ranee-cover -for -Ir an- re lated-shipping
By MEIR team
News > Middle East29 Nov 2018
Global Marine
The International Group (IG) of P&I Clubs has warned Club members that there is the potential
for there to be significant reinsurance shortfalls, in circumstances where a Club covers a claim
with an Iranian nexus, following the re-imposition by the US of sanctions on Iran.
The US decided in May to withdraw from the Joint Comprehensive Plan of Action (JCPOA)
Agreement signed by China, France, Germany, Russia, the UK, the US, the EU and Iran. The US
has re-imposed sanctions on Iran that had been lifted or waived under the JCPOA with the
second and final wind down period having ended on 4 November 2018.
The IG said in a circular issued this week, "Following the end of the wind down period there may
still be some limited trade with Iran that is possible for non-US persons to undertake without a
significant risk of violating US secondary sanctions (for example, the carriage of certain
agricultural commodities, consumer goods and foodstuffs). Members should be aware,
however, that even if the trade does not appear to violate US sanctions, practical difficulties
mean that it is extremely unlikely that International Group Clubs will be in a position to make or
receive payments, provide security or respond to any claims in the usual manner."
The circular added, "For the 2018/19 policy year, individual IG Clubs retain the first US$1 Om of
liabilities arising from an incident. Between US$10m and US$100m, liabilities are shared
between all 13 International Group Clubs (the Pool). If any of the 13 International Group Clubs is
prohibited (by sanctions applicable to that Club) from contributing their share of any Pool claim,
the individual Member will bear that shortfall in accordance with the applicable Club's rules.
The circular also said, "Liabilities above $1 00m fall within the IG's Excess Loss Reinsurance (GXL)
programme. In respect of a claim which engages the GXL programme, any sanctions related
shortfall which arises in relation to a liability for which the Club is not directly liable under an
approved certificate or guarantee (so-called non-certificated liabilities), is not automatically re­
pooled by the IG Clubs and will be borne by the Member under the applicable Club's rules. It is
material in this regard to note that as a consequence of the withdrawal of General Licence H
(which applied to non-US domiciled affiliates and subsidiaries of US domiciled insurers and
reinsurers), a significant minority of reinsurers will no longer be able to rely on that Licence to
contribute to claims with an Iranian nexus."
112
- 529 -

The IG also says that the practical difficulties encountered by insurers are also likely to be faced
by Club members when it comes to, for example, making or receiving payments in relation to
Iranian trade in view of the inability or unwillingness of banks to handle monetary transactions
with even a remote nexus with Iran.
The IG notes too that there are reports that eight countries --China, India, Italy, Greece, Japan,
South Korea, Taiwan, and Turkey-have or will be granted waivers from the US so that they may
continue to be permitted to import limited amounts of Iranian crude oil. The waivers or
Significant Reduction Exemptions (SRE),do not extend to any other commodities. It is further
understood that countries holding SREs are being advised by the US administration to import
Iranian crude only on vessels owned by the Iranian shipping companies, NITC or IRISL, or on
vessels registered in the country holding the SRE and only where those vessels are insured
under a sovereign guarantee issued by the government holding the SRE.
The 13 P&4 Clubs, which comprise the IG, between them provide marine liability cover
(protection and indemnity) for approximately 90% of the world's ocean-going tonnage.
212

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Annex 204
S. Zable, “INSTEX: A Blow to U.S. Sanctions?”, Lawfareblog, 6 March 2019

- 531 -

- 532 -

INSTEX: A Blow to U.S. Sanctions?
--------------------------------------------------------■
I
lawfareblog.com/instex-blow-us-sanctions
6 mars 2019
In January 2019, France, Germany, and Britain announced the creation of a new payment­
processing system designed to keep alive the Joint Comprehensive Plan of Action (JCPOA), also
known as the Iran deal. The Instrument in Support of Trade Exchanges (INSTEX) is a European­
government­controlled Special Purpose Vehicle (SPV), a legal entity created specifically to allow
companies based in the European Union­and, in the future, potentially elsewhere­to continue
to engage in business with Iran without running afoul of U.S. sanctions.
When President Trump withdrew from the JCPOA in May 2018, the United States not only
reimposed on Iran the sanctions that existed prior to the agreement but also added new
sanctions. As Hilary Hurd noted on Lawfare, "An estimated 700 individuals, entities, and aircraft
are now subject to U.S. sanctions, including over 300 targets not previously sanctioned and
more than 50 Iranian banks and their foreign subsidiaries." European countries were incensed
and began to openly discuss ways to help companies circumvent U.S. sanctions and thereby
preserve the deal. The result was INSTEX.
INSTEX still faces numerous hurdles in its quest to provide Iran sufficient economic benefits to
keep the JCPOA alive. But if it is successful, it will create a road map that other countries can use
to bypass U.S. sanctions, which could dramatically reduce the effectiveness of U.S. international
economic policy.
Extraterritoria I Sa net ions
In their standard form, sanctions prevent entities that are subject to a country's laws from doing
business with a sanctioned entity. But U.S. secondary sanctions go further, prohibiting U.S.
companies and banks from doing any business with third­country companies that do business
with sanctioned entities. This allows the U.S. to impose sanctions on companies that are not
subject to U.S. jurisdiction. This is why Huawei's Chief Financial Officer Meng Wanzhou was
charged with bank fraud: According to the Justice Department, Meng lied to a U.S. bank about
Huawei's business with Iran, putting the bank at risk of violating U.S. law.
This essentially creates a choice for multinational companies: Do business with Iran or do
business with the U.S. But the choice is actually more extreme than that due to the importance
of the U.S. dollar as the world's reserve currency. Transactions of all types, all over the world, are
conducted in dollars, and many of these transactions­even if they do not have any other
connection to the United States­run incidentally through U.S. banks, exposing their makers to
U.S. sanctions through fleeting contact.
1/4
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The extraterritorial impact of U.S. sanctions is magnified by their effect on a private Belgian
company called SWIFT. SWIFT provides a messaging system that connects more than 11,000
banks all over the world, allowing for universal money transfers. As a Belgian company, SWIFT is
not subject to U.S. jurisdiction or direct U.S. sanctions. But the U.S. has threatened to impose
sanctions on SWIFT itself if it does not disconnect sanctioned Iranian banks from its networks.
As a result, SWIFT has, reluctantly, agreed to remove sanctioned Iranian banks-including Iran's
central bank-from its systems, cutting them off from one of the core mechanisms of global
finance and making it exceedingly difficult technically for them to engage in financial
transactions with most of the world's mid-sized and large financial entities. But SWIFT did so
under protest, noting that while in 2012 it complied with EU sanctions on Iran because it is
subject to EU jurisdiction, its compliance with the 2018 sanctions was "regrettable" and "taken in
the interest of the stability and integrity of the wider global financial system." And European
leaders began to seek an alternative to SWIFT that could facilitate commerce with Iran without
falling victim to U.S. pressure.
The International Reaction, Step 1: the EU Blocking Statute
Unilateral, extraterritorial U.S. sanctions have long been controversial (at best). Other countries
argue that such sanctions represent an improper extraterritorial imposition of U.S. law; that
they violate international law, including World Trade Organization (WTO) law and the U.N.
Charter; and that they threaten the international trading system. As a reaction to the
reimposition of U.S. sanctions, the EU revived its 1996 blocking statute, which makes it illegal for
EU companies to comply with specified extraterritorial U.S. sanctions. The blocking statute
requires EU persons and companies to (1) inform the European Commission of any harms the
company faces due to other countries' extraterritorial application of specific sanctions laws,
which are identified in the blocking statute's annex (theoretically this allows the statute to apply
to any country's extraterritorial sanctions, but it currently includes only U.S. laws), and (2) not
comply with those laws or with international court decisions stemming from them. The statute
creates an extremely broad cause of action for damages for EU persons in the courts of the
bloc's member states to recover any damages, including attorney fees, from any person
(presumably, any person over whom the court has jurisdiction), caused by compliance with the
specified sanctions laws. It also prohibits EU courts from enforcing judgments stemming from
those laws obtained in other jurisdictions. However, it does allow for limited waivers "to the
extent that non-compliance would seriously damage their interests or those of the Community,"
based on a set of criteria.
The blocking statute was originally passed in response to extraterritorial U.S. sanctions on Cuba
and Iran, specifically the Helms-Burton Act, which codified and expanded the U.S. embargo on
Cuba, and the Iran and Libya Sanctions Act. It has seen some use; for example, in 2007 the
Austrian government charged an Austrian bank with violating the statute when it canceled bank
accounts for Cuban citizens as part of its acquisition by a U.S. hedge fund. (The case was
dropped when the hedge fund was able to obtain a special license from the U.S. government to
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keep the bank accounts open.) However, the statute has not been significantly tested because in
1998 the U.S. agreed to waive the most objectionable sanctions. The new regulation, passed in
June 2018, gives the statute new life by extending it to the sanctions the Trump administration
brought back when it exited the JCPOA.
But ultimately, despite the blocking statute, EU companies-as well as companies from other
countries, including major Chinese state-owned enterprises and Russia's Lukoil-have largely
complied with the reimposed U.S. sanctions, announcing plans to pull out of intended projects
in Iran. This includes expected billion-dollar investments from French company Total and
German conglomerate Siemens. Although this puts the companies in direct violation of the EU
blocking statute, the statute is unlikely to be vigorously enforced, as it would put EU companies
in a no-win situation. In a battle between complying with the EU blocking statute and complying
with U.S. sanctions, the EU and its companies have largely given way to the U.S.
The International Reaction, Step 2: INSTEX
This is where INSTEX comes in. INSTEX is essentially a barter system that allows companies in
the EU, and potentially elsewhere, to completely avoid the U.S. financial system by eliminating
cross-border payments. Per the Financial Times:
Under this model, a European fuel trader buying Iranian oil could be matched with a European
manufacturer selling machinery to an Iranian company. The European oil buyer would not pay the
Iranian seller but would instead send its payment to the European manufacturer. At the same time in Iran,
the Iranian machinery buyer would not pay the European seller but would instead send its money to the
Iranian oil seller.
INSTEX provides a mechanism to enable transactions with Iran, allowing such transactions to
take place in the absence of SWIFT and other typical payment systems. Theoretically, INSTEX will
allow any interested companies to continue doing business with Iran without engaging in
sanctionable conduct.
It's unclear whether INSTEX will be successful. The legal and technical details of INSTEX's
functioning remain undefined, and Iran will have to overcome political opposition to set up its
own mirror-image version of INSTEX. The EU has been discussing creating an alternative
payment system for months, but the process was delayed because no EU country wanted to risk
U.S. wrath by hosting the instrument. INSTEX is expected to start small, working with only small­
and medium-sized companies that do no business with the U.S. and confined to the realms of
food and medicine. And large multinational companies are still extremely hesitant to sign on for
fear that U.S. sanctions authorities will find a way to punish them despite technical compliance.
Implications
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Even if INSTEX fails, it seems certain that the international desire for a dollar-independent
payment system will only grow as the U.S. continues to expand its extraterritorial economic
policies-a trend that did not begin with Trump but that has accelerated under his
administration. Consider Title Ill of the Helms-Burton Act, which allows U.S. citizens to sue
foreign entities over property confiscated in the 1959 Cuban revolution. Every president since
the act's passage in 1996 has waived the provision due to the immense ramifications-in terms
of both international reaction and the technical burdens on U.S. courts-of making billions of
dollars in foreign-company funds susceptible to confiscation. But in January 2019, Trump
suggested that he was considering ending the waiver, and on March 4, Secretary of State Mike
Pompeo announced that the administration would be suspending the waiver for Cuban-owned
entities. While this suspension does not currently permit suits against non-Cuban companies,
administration officials suggested that more significant steps could be forthcoming, potentially
including fully terminating the waiver and exposing non-Cuban companies to suit in U.S. courts.
This move, should it occur, would cause international interest in alternatives to the U.S.-centered
financial system to reach a fever pitch.
Eventually, projects like INSTEX could have a dramatic effect on the United States' ability to effect
change through sanctions. While the effectiveness of sanctions in general is hotly debated, there
is no doubt that if other countries are able to create U.S.-independent financial systems, the
international influence of U.S. economic policy will decline precipitously. This could eventually
even threaten the central role that the United States plays in the global economy-a role that
many economists believe has proven essential to the growth and stability of the U.S. economy in
recent decades.
At the moment, dollar dominance seems safe; INSTEX is a small, tentative step. Disentangling
even a small portion of global commerce from the U.S. would be a major undertaking, and at
the moment there are no ready alternatives. But the fact that the EU has actively put into effect
a potential path to help companies avoid U.S. sanctions, after decades of complaining about U.S.
extraterritoriality, suggests that other countries are ready to do more than talk.
U.S. policymakers may be underestimating the importance of the dollar's reserve-currency
status in keeping U.S. borrowing costs low, magnifying the effects of U.S. economic policy,
protecting the U.S. economy, and bolstering U.S. foreign policy. The fact that international
distaste is beginning to bubble over into action should be a warning sign.
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