President Hassan Rouhani said Tuesday that the Supreme Council of Economic Coordination has approved the outlines of crude oil presale contracts to domestic buyers.
Rouhani said the council approved the outlines of the scheme on Monday, expressing the hope that his government could implement it after it gets the final go-ahead.
The SCEC is an ad hoc economic decision-making body comprising heads of the three branches government.
The plan, he said, is in line with efforts to involve the people in the economy, describing it as “an effective measure to boost the capital market and a move in the right direction to counter the unjust sanctions imposed by enemies”.
He was referring to the open hostility of the United States under Donald Trump and the harsh and illegal economic sanctions his administration has imposed since 2018 after abandoning the historic Iran nuclear agreement.
The oil sale initiative is designed to “control the money supply and direct it toward the production sector,” he said.
Much is not known about the plan. However, unofficial reports have it that it is part of the so-called ‘economic relief’ package promised earlier by Rouhani.
The central bank governor, Abdolnasser Hemmati, on Monday said the intention is to “control the money supply” and “help government spending”.
It reportedly pertains to government plans to presale 220 million barrels of crude oil to the people during a course of one year using Islamic parallel salaf contracts.
If the government succeeds in realizing this target, it would be able to generate 1,900 trillion rials (8.2 billion), according to Persian-language economic newspaper Donya-e-Eqtesad.
To hedge investment risks emanating from decline in international crude prices and control forex market volatility, the government guarantees that investors would not have to bear any loss. In the worst case scenario they would make profit equivalent to the maximum interest rates banks pay on deposits.
Salaf contracts are due to be traded at the Iran Energy Exchange. Reimbursement of contracts are backed by the government’s future crude sale after the US embargo on Iran’s oil export is lifted and the government can access the approximately $54 billion of its assets blocked overseas due to the US banking restrictions.
Standard parallel salaf is an Islamic contract similar to futures, with the difference being that the contract’s total price must be paid in advance.
