VOL. XLV
No 7
18 February 2002
IRAN
Iran Seeks Oil Pre-Financing: Offers Crude Oil Collateral To
Secure $1Bn
The Central Bank of Iran (CBI) is
looking to secure $1bn in loans from European banks, using as collateral an unspecified
volume of crude oil exports under contracts managed by the Naftiran Intertrade
Company (NICO) marketing subsidiary of the National Iranian Oil Company (NIOC).
MEES understands that the money is intended to be used by CBI to
provide: backing for two proposed programs for the next budget year; the
adoption of a single dollar/rial exchange rate; and the creation of jobs.
President Mohammad Khatami
submitted the draft budget bill in late December, proposing the adoption of a
unified exchange rate of about $1=IR7,700, and the scrapping of the multi-tier
exchange rate system (MEES, 14 January). The move is one of a raft of
measures aimed to bring Iran in line with global monetary practices. Part of
the loan would be used to ensure that Iranian companies were able to purchase
equipment and services on the international market, a transaction that is
difficult under the present system. The remainder would be used for the creation
of jobs, with unemployment being viewed as a major problem in Iran.
An emergency fund, the Oil
Stabilization Fund, operated by the CBI on behalf of the government is expected
to reach $10bn by the end of the current Iranian year (20 March), and has
received a boost in the past two years through income from relatively high oil
revenues. However, the law states that this fund cannot be used for the support
of budget measures and so CBI must secure funding from international markets.
This is the first time Iran has sought a so-called pre-financing agreement
since 1998, when it secured $1.2bn of pre-financing from European banks against
collateral on contracts for about 275,000 b/d of supplies. In this latest round
of fund-raising, the CBI has so far completed a $500mn pre-financing package
for next year’s budget, again reportedly with European banks. The bank is said
to be negotiating a second $500mn loan that is intended to be finalized by the
end of the current Iranian year.
Copyright © 2002 Middle East Economic Survey