Committee to Settle Oil Ministry Debts

Committee to Settle Oil Ministry DebtsCommittee to Settle Oil Ministry Debts

A committee has been established to examine mechanisms by which the Oil Ministry can settle its $50 billion debt, director of investment affairs at the National Iranian Oil Company said.

The committee comprises representatives of the Management and Planning Organization of Iran, the Central Bank of Iran, the Ministry of Economic Affairs and Finance, and the Oil Ministry, Ali Kardar was quoted by ISNA as saying.

Parliament has already granted the Oil Ministry a two-year moratorium (March 2015 - 17) to clear its debts. The ministry would be unencumbered and no debt will be paid during the moratorium period, which encompasses the first year of the sixth five-year economic development plan (2016 - 21).

"A debt settlement mechanism is to take effect in the second year of the sixth development plan," Kardar noted.

According to the plans, NIOC should have issued 5,000 billion rials ($1.5 billion) worth of participatory bonds last year, but due to its accumulated debts to the CBI as well as other major Iranian banks, it was not permitted to issue the bonds, and the anticipated $1.5 billion were not realized.

The CBI was mandated by the budget law to provide NIOC with $10 billion in funding. However, it could not fulfill its obligation due to problems with its own revenues. At the end of the year, CBI could provide a $2 billion loan. The NIOC, as a result, got into arrears and oil projects were delayed.

Participatory bonds, borrowings from CBI and the recent provision stipulated by Note 2(G) of the national budget law are the main financial instruments through which NIOC can acquire funding for its projects and reimburse the expenses. In addition to the aforementioned means, the National Development Fund of Iran has also undertaken to provide $4.8 billion for development of joint oil and gas fields in the current year.

Note 2(G) establishes the investment framework for the Oil Ministry, allowing it to invest up to $100 billion in oil and gas projects in line with Article 44 of Iran's Constitution to help open new opportunities to the private sector and boost privatization.