Iran's crude oil output will reach 3.4 million barrels per day (bpd) by the end of September, the country's oil minister was quoted as saying on Wednesday, despite US sanctions remaining in place.
"Our current crude oil production is 3.3 million barrels per day and by the end of September this amount will increase to 3.4 million," Javad Owji said.
The increase in crude production coincides with a steady rise in Iran’s exports. TankerTrackers.com that monitors global oil shipments, reported Monday that in the initial 20 days of August, Iran dispatched an average of over two million barrels of oil daily, marking a more than 30-percent surge compared to the past few months.
In 2018, then-US President Donald Trump exited the JCPOA nuclear agreement and re-imposed sanctions on Tehran, whose crude oil output dropped to 2.4 million barrels per day on average in 2021.
However, Iranian oil shipments began to pick up toward the end of 2020, as candidate Joe Biden announced in September of that year his intention to revive the 2015 JCPOA. During 18 months of talks with Iran in 2021 and 2022, Tehran steadily increased its oil shipments and uranium enrichment.
The latest boost in production and exports also coincides with an agreement announced in mid-August that the United States allowed the release of $6 billion of Iran’s money frozen in South Korean banks in exchange for five American hostages. Some believe that a larger secret deal exists with Tehran over its nuclear program and the Biden administration is not enforcing sanctions.
Earlier this month, Iran announced its oil exports had surpassed 1.4 million barrels per day, primarily driven by sales to China.
House Majority Leader Steve Scalise, GOP Conference Chair Elise Stefanik and House Foreign Affairs Committee Chairman Michael McCaul have written to Biden accusing him of breaking a 2015 law by negotiating a secret nuclear “understanding” with Iran and hiding it from Congress.
Any negotiations and agreements with Iran must go through the Iran Nuclear Agreement Review Act, which clearly states that within five days after reaching any agreement with Iran regarding Iran's nuclear program, the President must relay to Congress several issues for approval.
These include “the text of the agreement and all related materials and annexes; a related verification assessment report of the Secretary of State; a certification that the agreement includes the appropriate terms, conditions, and duration of the agreement's requirements concerning Iran's nuclear activities, and provisions describing any sanctions to be waived, suspended, or otherwise reduced by the United States and any other nation or entity, including the United Nations”.
The three Republicans wrote to Biden of their “significant concern” that the administration is pursuing a nuclear understanding with Iran alongside a hostage release deal. Earlier this month, five dual US-Iranian citizens held in Iran were released in return for the unfreezing of $6bn of Iranian funds in South Korea, a move which experts said only compound Iran’s policy of hostage taking for gaining leverage against the West.
The letter, dated August 21, stated “any such deal or understanding with Iran that does not permanently and completely halt Iran’s nuclear enrichment raises concerns that your Administration is entrenching an Iranian nuclear program that threatens US national security”, detailing the rapidly increasing levels of uranium enrichment revealed this year.
“Reducing the rate at which Iran is stockpiling 60% enriched uranium does not significantly change this threat, particularly as Iran continues to install advanced centrifuges,” the trio said, reiterating Iran’s cessation to comply with the JCPOA nuclear agreement and its continued refusal to fully cooperate with an ongoing International Atomic Energy Agency (IAEA) investigation.
Referring to last week’s deal, the group stressed that the hostage-taking policy of the regime, which has been going on for years, is the Iranian Republic’s “negotiating tactic and funding mechanism”, all of which puts US security and the security of its citizens at greater risk.
Just last week, Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies and former White House National Security Council director for countering Iranian weapons of mass destruction, raised the matter of Biden’s skirting the legal obligations. “Emergency hearings cannot be held. Resolutions of disapproval cannot be fast-tracked. President Biden has successfully evaded the Iran Nuclear Agreement Review Act, which requires him to notify Congress of any agreement with Iran related to its nuclear program before lifting sanctions,” he said.
The Republicans warned Biden that if “the Administration continue to ignore US law and flout congressional oversight, we will use all the tools at our disposal to bring transparency and accountability to the American people and return to a policy of maximum pressure that reverses Iran’s nuclear advancements and deters its targeting of American citizens and service members, support for terrorism and other malign activities”.
The controversy continues alongside allegations that the reasons for the suspension of Iran envoy Robert Malley have been hidden from Congress for several months. While the news of his suspension over what was called suspected security breaches was announced in June, it is believed that it had happened as early as April, which was revealed by an Iranian government newspaper.
In spite of multiple investigations going on side by side, including the Federal Bureau of Investigation, Malley suspected of mishandling confidential security documents, he has landed faculty positions at Yale’s Jackson School and Princeton’s School of Public and International Affairs.
The Central Bank of Iran announced on Tuesday that any unauthorized currency transactions and online advertisement are now considered a "crime."
The new decree includes any "unauthorized" currency transactions in the virtual space, such as buying and selling, transfers, as well as futures trading, brokerage, and promotion of these activities online "without the Central Bank's permission" are considered instances of criminal content.
The Central Bank's decision underscores the government's determination to tighten its grip on the foreign exchange market. Currency exchange small businesses that engage in such activities may face legal consequences, including potential criminal charges and revoking of their licenses.
The government is desperate to control the currency market hoping that it can artificially keep the Iranian rial high. The currency had lost its value 12-fold since 2018 when the United States withdrew from the JCPOA nuclear accord and imposed sanctions.
The devaluation of the currency has exacerbated an already high rate of inflation. More and more Iranians are moving to exchange their savings to other currencies, but due to various restrictive mechanisms imposed on currency exchange, the people are increasingly using unofficial means such as dealers who work from home as well as relatives and acquaintances.
According to an article by Iran's leading economic daily, transactions among relatives have become the primary choice for individuals to acquire or sell dollars.
The current boom in home-based exchange offices is driven by several factors, the paper said, noting that due to high inflation in recent years, purchasing dollars is considered as an investment option for households, effectively turning Iranian families into potential exchange offices.
Another factor is the complicated regulations of the official market, multiple exchange rates, and restrictive conditions for buying and selling dollars in authorized exchange offices, lead family-run exchange businesses to become the preferred choice for households.
The imposition of taxes on transactions has also turned people away from official currency transactions. Another factor contributing to the growth of home-based exchange offices is people’s reluctance to go to the black market due to the risks associated with dealing with black-market dealers, the daily added.
“For example, someone planning to travel to foreign countries will first inquire among their acquaintances to see if anyone they trust has some of the needed foreign currency that they can obtain. Alternatively, they might hear from someone recently returned from abroad that they are willing to offer their foreign currency assets at a negotiated price, typically around the market rate,” Donyaye Eqtesad explained.
Earlier in August, the Central Bank dissolved the Iranian Exchange Offices Association (Kanoun-e Sarrafan-e Iran), a move that led to a sudden temporary hike in the dollar rate. One of the reasons mentioned for the move was a lack of cooperation with the CBI, meaning that the Association had been reluctant to engage in artificial machinations to keep the dollar low.
The Iranian Exchange Offices Association had previously reported the closure of nearly half of the country's exchange offices in the past year, calling it as the "Farzin masterpiece" in reference to Mohammad Reza Farzin – the governor of the Central Bank.
The government has also increased pressure on Iran Chamber of Commerce, Industries, Mines and Agriculture following an election for its chairman, contested by the hardliners of the regime. The chairman of the chamber, often referred to as the “private sector’s parliament” with over 400 members, has the role of coordinating between the private sector and government and is sometimes required to participate in meetings with government officials. Members of the chamber have often criticized regime policies that have led to an economic crisis, including a confrontational foreign policy. The chambers often produce economic reports that the government finds embarrassing, or they criticize proposed budget bills and other plans.
Amidst the government’s failed attempts to control the exchange market, the rial was trading nearly 500,000 to the US dollar. One year ago, the dollar traded at around 250,000 rials.
The liquidation of Tosse-eh (Development) Credit Institution is in its final stages while the order to dissolve Ayandeh (Future) Bank was given to the Central Bank earlier this week. There are several other financial institutions, such as Caspian and Nour, that are set to dissolve or merge with other banks.
Reports of the liquidation of the unprofitable banks have been circulating in recent years, with Tosse-eh sending messages to its customers asking them to close their accounts until mid-March 2022. The institution has 30 branches all over Iran.
However, like a lot of other decisions in Iran, the liquidation never actualized, perhaps to avoid a mass panic among the population who already distrust the country’s banking system.
Lawmaker Gholamreza Marhaba, a member of the parliament’s economic committee, said Monday that according to the Constitution if a bank or financial institution strays from regulatory oversight and becomes unprofitable, the law outlines a series of measures, with the final step being dissolution or merger of the bank.
“There are unhealthy banks within the country's banking system, with some institutions in the liquidation phase, but we cannot discuss them in detail at present due to the lack of official information,” he explained.
Marhaba, however, said, “I want to emphasize that fortunately, none of the private or state-owned banks are at risk of bankruptcy. These banks have sufficient assets to easily cover their losses and compensate them. Therefore, customers can rest assured that neither Ayandeh Bank nor any other bank is facing bankruptcy.”
The Ministry of Economy seeks to exercise greater oversight over the unprofitable banks to ensure their financial stability, especially the non-state banks that have engaged in non-banking activities, he noted and said that “military organizations” had created institutions and banks that did not perform successfully, and at least five of them have so far merged into Bank Sepah, the official bank of Iran’s Revolutionary Guards (IRGC).
The dissolution of banks should not be sensationalized in the media, and discussions about the fate of such banks should be held behind closed doors “to maintain customers' confidence without tarnishing the reputation of these financial institutions,” he added in remarks typical of regime insiders who prefer to hide negative news.
A similar approach was evident in remarks by ultra-conservative lawmaker Fereydoun Abbasi who called Monday for confidentiality of economic indicators and other statistics, under claims of security risk.
Mashregh News, a hardline website affiliated with Iran's Revolutionary Guard, published an article in July titled “Countdown for Bankrupt Banks,” explaining the threats of such entities for Iran’s economy.
“Bankruptcies among Iranian banks are becoming increasingly prominent due to the country's economic crisis, posing irreversible consequences if ignored,” Mashregh News said, noting that big loans to officials with links to regime insiders – called ‘Major Debtors’ in Iranian media – as well as a lack of transparency in real asset holdings are among the major factors behind the issue.
The Central Bank of Iran issued a warning earlier in the year, giving ultimatum to underperforming banks to rectify their financial situations by late-September, with CBI Governor Mohammadreza Farzin saying that any bank or financial institution that fails may face liquidation.
Government interventions, excessive borrowing, and a lack of accountability in the banking sector are cited as other key factors leading to these bankruptcies. While some banks may be temporarily bailed out by the government, the overall trust in Iran's financial system has been significantly eroded, making it difficult for the economy to recover. Iran’s government has been aggressively borrowing from quasi-public banks to fill its budgetary gap and keep its unprofitable companies afloat.
Abbas Pourkhosravi, a banking analyst, told Mashregh News that changing the current banking structure will help prevent bankruptcies, highlighting that “unless Iran establishes connections with the international banking system, significant transformations in the country's banking system will not occur.”
Bankruptcies in the banking sector have a ripple effect, impacting various industries and causing widespread dissatisfaction among the public, Mashregh News added, warning that restoring trust in the financial system will be a challenging task, as eroded confidence can have long-lasting consequences.
The government is in debt, and the banks are even more indebted, a vicious circle that sees accumulated losses concealed from the public through manipulating financial statements on losses and loans and deferring the losses to the following year.
