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Financial Times: Iranian official reports record oil revenues

By Najmeh Bozorgmehr in Tehran
Published: February 28 2008 16:15 | Last updated: February 28 2008 16:15

Iran’s oil revenues reached a record $62bn for the first 11 months of this Iranian year – an increase of 31 per cent over the same period the previous year, according to a senior Iranian oil official.

Hojjatollah Ghanimifard, deputy to the head of the National Iranian Oil Company (NIOC) for international affairs said Iran’s oil exports, at 2.4m b/d, would generate about $69bn by the end of the year on March 19. Iran produces around 4.2m b/d of oil, of which 2.4m b/d is exported.

Analysts believe high oil revenues have enabled Iran to overcome the logistical costs that have resulted from United Nations sanctions and the US effort to prevent Iran from gaining access to the US financial system for dollar transactions through third-party banks.

Iran has shifted its financial transactions from dollars into other currencies to avoid being tracked by the US treasury, which monitors any transfers above $2,000.

Mr Ghanimifard told the FT a quarter of export transactions had been conducted in the Japanese yen and the rest in euros during the past three months, while dollar transactions had been “almost totally deleted”.

“We issue invoices in dollars and agree with clients that the l/cs [letters of credit] and other means of payment will have a non-dollar basis,” he said.

Ali Shams-Ardakani, head of the energy committee of Iran’s Chamber of Commerce, said the move away from the dollar was “absolutely right” and was economically justifiable on the grounds that it helped prevent losses due to the fall in the value of the US currency. “It should have happened much earlier,” he said.

Mr Ghanimifard did not deny some problems with letters of credit but declined to say which banks were refusing to issue them, or whether they included Chinese banks which, along with UAE banks, have provided the greatest assistance to Iran in getting around sanctions.

“Iran uses many other normal means”, he said, adding that this did not include front companies as guarantors instead of banks, but instruments like promissory notes, drafts, bank credits, electronic and telegraphic transfers.

“Sanctions could not harm our exports and those banks that have problems issuing letters of credit for our clients are the ones who lose income,” he said, insisting that trying different channels did not cost Iran “even one single cent”.

An energy expert who asked not to be named disagreed, saying the cost of moving from dollar transactions to other currencies could be as high as several billion dollars a year.

Sanctions have impeded the development of Iran’s oil and gas reserves. Western giants like France’s Total, Royal/Dutch Shell and Spain’s Repsol have been hesitant to sign up to new deals, but China’s Sinopec and Malaysia’s SKS have recently signed multi-billion-dollar contacts.

Russia and Turkey have also shown interest in developing Iran’s gas fields and Iran is expected to sign a $20bn contract with China National Offshore Oil Corp to develop its North Pars gas field soon.

“We understood that money is not only in the west and we could attract from other countries,” Mr Ghanimifard said.

Iran is in dire need of foreign investment not only to upgrade its aged oil fields, which according to Mr Ghanimifard lose production of about 250,000 barrels a year, but to increase its current production capacity to meet domestic demand and retain its market share.

To curb consumption and imports, Iran began petrol rationing last year and this is expected to continue for at least another year.

Mr Ghanimifard said petrol imports during the past eight months reached 15m litres per day, more than half of the figure in the previous year. He said Iran imported $3.7bn during the past 11 months.

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