Economy, Business And Markets

Gov’t Tightens Grip on Petrochem Trading

Gov’t Tightens Grip on Petrochem Trading  Gov’t Tightens Grip on Petrochem Trading

Iran’s vice president for executive affairs has issued a decree to limit the sale of petrochemical products by producers to Iran Mercantile Exchange.

Otherwise, producers will have to sell at prices set by the government or face legal prosecution. Urea fertilizers are exempt from the order.

“The Consumers and Producers Rights Protection Organization is responsible for safeguarding consumer rights and prosecution of wrongdoings,” Mohammad Shariatmadari wrote in a letter addressed to the head of the organization, Mohammad Navaei.

The mandatory offering of petrochemical products on IME started early 2012. Proponents cite added transparency and fewer rent opportunities and ease of monitoring as reasons for the mandate.

“If petrochemical products are traded outside the exchange, most of the profits will go to people with high connections in the government and petrochemical companies,” state-owned IRNA wrote.

Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh has been a tough advocate of removing the ban. He even wrote a letter about it to the president, which garnered much criticism. His right-hand man, Mojtaba Khosrowtaj, however, said proponents of the move lack knowledge of petrochemical industry and base their arguments on wrong statistics.

In a letter published on November 5, the vice minister laid out 12 reasons for not trading petrochemicals on an exchange, saying while some reasons may be solvable, some will in the end doom petrochemical trading.

In short, Khosrowtaj said because of the intricacies involved in buying and selling petrochemicals, offering them on an exchange is difficult and in the end will damage the industry’s sales and business model, drive up costs and shut some consumers out of the market.

Furthermore, this goes against an exchange’s core concept of free trade, he added.