Rouhani: Private Sector Could Help Nullify US Sanctions

EghtesadOnline: President Hassan Rouhani has called on the private sector to play a serious role in the economy, stressing that his government will ensure the business community benefits from the resources of the National Development Fund of Iran–the country’s sovereign wealth fund.

News ID: ۷۴۵۴۰۵

29 May 2018

“The first thing that we need to take on is the divestiture of [state] enterprises as we need an active private sector to strip the US of its main pressure tool,” Rouhani was quoted as saying by his official website during a meeting with the country’s businesspeople late Sunday.

“Americans today and only in appearance claim that their intention is to pressure the Iranian government and help the Iranian people. But if we can have an active private sector, this strategy will fail because putting pressure on our country’s private sector is more difficult for them than pressuring the government sector.”

Rouhani’s statements come in the wake of the decision made by US President Donald Trump to unilaterally withdraw from JCPOA, which requires Tehran to  curb its nuclear program in exchange for sanctions relief. Along with the United States and Iran, Russia, China, Germany, France and the United Kingdom are also parties to the deal, Financial Tribune reported.

The US move has been criticized by other signatories, with the European Commission launching a process for reactivating the 1996 law that allows companies to ignore rulings of any courts outside the European Union and to recover damages caused by sanctions “from the natural or legal person, or any other entity, causing the damages”.

In a speech last week, Secretary of State Mike Pompeo said Washington will increase financial pressure on Iran by imposing the “strongest sanctions in history” on the Islamic Republic, if Tehran refuses to change the course of its foreign and domestic policy”.

Iran’s privatization initiative gathered force after the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei recognized the private sector as a pillar of Iran’s economy and said privatization in the past had caused various problems for the country since divestitures did not involve the “real private sector.”

Forex Stability

The president also spoke about the country’s foreign exchange situation, stressing that changes in the foreign exchange rate should be predictable so that businesses “for instance, know how much the exchange rate would vary each year”.

“In any case, I emphasize that we give assurances to the private sector or at least the production sector on the foreign exchange rate in the coming years so they can use NDFI’s resources more easily,” Rouhani said.

The foreign exchange issue has been described by the private sector as its most important concern. It has taken on more urgency after the government proceeded to unify the US dollar’s exchange rate last month.

The government announced last month that it has unified the exchange rate for the US dollar in response to the sharp plunge in Iranian rial over the past few months.

It has assured the public that the US dollar for defined purposes, including imports, travel, students and research projects, will be offered by the government at the exchange rate of 42,000 rials.

Government measures followed after lawmakers pressured it over the volatility, stressing that unless the government came up with a clear plan to stabilize the market, they would lay out their own measures.

The Cabinet has ruled that all exporters are required to return their export earnings to the country’s “economic cycle” either by selling them to or depositing them in banks, or reusing it for imports.

Businesses complain that the unified rate of 42,000 dollars–which has experienced two small increases ever since–is not real–something that would discourage them from selling their export earnings to banks at official rates.

They have also demanded that the central bank establish a “secondary” forex market based on supply and demand.

Emphasizing the importance of the business landscape, Rouhani also referred to efforts for attracting the businesses of Iranian expatriates.

“One of the things that we are pursuing in the meetings between the three [government] branches is to make it possible for Iranians living abroad to come and invest in the country,” he said.