Iran Expanding Ties With Int'l Monetary Institutions

EghtesadOnline: An Economy Ministry official has said that with the lifting of sanctions targeting Iranian economy in the wake of the 2015 nuclear accord, the country has joined various global monetary institutions, which goal will be further pursued in the future.

News ID: ۷۴۰۷۲۸

04 April 2017

"During the past few years and especially in the post-sanctions era, the administration of President Hassan Rouhani and the Organization for Investment, Economic and Technical Assistance of Iran made efforts to resume collaborations with international financial entities, all of which were realized as a direct result of JCPOA," Saeed Khani Oshani, a senior director at the OIETAI, said in a talk with the official news service Shada.

The Joint Comprehensive Plan of Action is the formal name of the nuclear deal Iran reached with six world powers.

"International sanctions meant that Iran was ostracized from major financial institutions to the detriment of its economy, but has now managed to rejoin them and create new connections," Financial Tribune quoted him as saying.

The official, who is in charge of international entities at the investment office of the Ministry of Economic Affairs and Finance, split these efforts into two categories of "reconnecting with institutions that had dealings with Iran prior to the sanctions" and "entities with which the country had no previous ties".

As examples of these two categories, Oshani first pointed to The World Bank as an international organization of which "Iran was a member since about 60 years".

The country's ties with WB was cut due to the international sanctions that imposed banking restrictions on the one hand and caused other countries to refrain from linking up with Iran on the other.

After the nuclear accord and because of efforts undertaken by the government, "The WB gradually announced that it will work with Iran again", the official said.

As to the second category, Oshani referred to Iran's membership in the Asian Infrastructure Investment Bank as a prime example.

Iran began negotiations to become a "founding member" of the bank three years ago while sanctions were still in place, which stood in the way of Iran becoming a member. Even if the membership were to be approved, "we would not have been able to use the benefits because our banking system was facing restrictions".

But after the sanctions, Oshani adds, there were no excuses and Iran became a shareholder and member state of AIIB.

An international financial institution, AIIB aims to support infrastructure development in the Asia-Pacific region. It was proposed by China and consists of 57 member states.

The bank is widely regarded as a strong and emerging rival to western lenders, namely the International Monetary Fund and The World Bank—both headquartered in Washington, and operates with a capital of $100 billion, equivalent to two-thirds of the capital of the Asian Development Bank and about half of The World Bank.

Iranian lawmakers approved the proposal of Iran’s membership in AIIB in late August and President Hassan Rouhani enacted the law in early October, while along with 26 other initial founding member states, Iran signed the bank's constitution in Beijing on June 29, 2015.

Added Benefits

As Oshani outlines, rejoining previous institutions and reaching out to new ones will have a significant impact on absorbing foreign investments, namely from The World Bank that can allocate funds gradually after identifying and being introduced to local projects.

The official noted that AIIB identified potential projects in Iran in February and aims to finance major projects in a number of Iranian cities.

"By developing collaborations and eventually hosting a delegation from AIIB, which visited four Iranian provinces, the Ministry of Economy was able to approve about $600 million worth of funds for water and wastewater projects in the provinces of Gilan, Khorasan Razavi and Kermanshah, which will be implemented soon," he said.

Furthermore, OIETAI helped "attract the credit needed for 2017-19 from the Islamic Development Bank by sending a list of prioritized projects", Oshani said.

IDB is a multilateral development financing institution located in Jeddah, Saudi Arabia, which was founded in 1973 and aims to serve Muslims in member and non-member countries.