Economy, Business And Markets

Oil Revenues Double After Nuclear Deal

Big developments resulted from the JCPOA’s implementation, but Iran must not forget to capitalize on the full potential of the accord
The volume of oil exports and as a result, our forex revenues, has doubled during in the pot-JCPOA era.The volume of oil exports and as a result, our forex revenues, has doubled during in the pot-JCPOA era.

Iran has witnessed a significant surge in its foreign exchange earnings as a result of the steady increase in oil exports in the post-sanctions era, the governor of the Central Bank of Iran said on Tuesday.

"The volume of our oil exports and as a result, our forex revenues, has doubled in the post-JCPOA era," announced Valiollah Seif during a visit to Kohgilouyeh-Boyerahmad Province in the country's southwest, the official website of CBI reported.

One of the biggest achievements of the Joint Comprehensive Plan of Action–the official name of the landmark nuclear agreement between Iran and world powers–was that many new opportunities were created for Iran's economy which, along with the implementation of Resistance Economy principles, "will lead us toward economic growth", he added.

Resistance Economy is a set of concepts put forward by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei to foster a self-sufficient yet outward-looking economy.

The multiple-year sanctions barred foreign investments in the Iranian oil industry and limited a low ceiling of 1 million bpd on the country’s oil exports among other restrictions on the Iranian economy.

Before the sanctions were lifted, Iran said it had made the preparations to boost its oil production capacity to pre-sanctions levels.

In early August, Iran’s First Vice President Es’haq Jahangiri said the country’s oil exports had already exceeded the pre-sanctions level of 2.5 million bpd. 

Seif referred to the current fiscal year as a sensitive one because it marks the first year of the JCPOA's implementation.

"Big developments resulted from the deal's implementation, but Iran must not forget to capitalize on the full potential of the accord," he said.

"Our expectations are much higher and we will pursue them consistently so that our international banking relations can be restored to pre-sanctions status."

This is a goal that has yet to be fully achieved, but the country is operating under difficult circumstances now.

"The number of correspondent relations secured by the banking system and the figures for investments and deals have been consistently on the rise, so we should focus on the positive effects and aspects of the accord," he said.

Due to the remaining US sanctions and heavy penalties in the past, most big banks still shy away from working with Iran.

The CBI governor proclaimed Iran's "economic stability" to be incomparable to other oil-producing states, noting that with the fall of oil prices in 2015, a shockwave was felt throughout the world which "rocked many countries with economic volatility, but that shock had no effect on our country's economy".

Prelude to Forex Rate Unification

Seif further said this economic stability had been achieved through positive actions undertaken in the past three years, which he said were a prelude to the unification of forex rates.

Referring to Iran's forex regime as a "supervised floating system", the CBI chief noted that this policy differs from exercising foreign exchange controls, as "the forex rates rise and fall in line with market forces and the macroeconomic needs of the country".

"Therefore, we witnessed a close to 5% rise in forex rates last year and a similar increase is expected this year," he said.

Seif stressed the necessity of policymaking for increasing the capital of banks, adding that the capital adequacy ratio is one of the most important banking ratios that must receive due attention.

"According to Basel II standards, the minimum capital adequacy ratio stands at 8% but unfortunately as a result of unsuitable conditions in our banking system, the [average] capital adequacy ratio of our banks is currently 4%," he said.

"However, it should be noted that achieving such a ratio entails a gradual and time-consuming process and with full understanding of the concept, the CBI has to walk a fine line to prevent negative shocks and observe Basel II and Basel III standards, eventually raising the ratio to 13%."