1

2

TABLE OF CONTENT

ISLAMIC REPUBLIC OF IRAN COUNTRY PROFILE…………………………….1

FINANCIAL MARKETS AND INSTITUTIONS OF IRAN…………………..…….2

TYPES OF FINANCIAL MARKETS AND INSTITUTIONS……………………….2

STOCK EXCHANGE OF IRAN & STOCK MARKET INSTRUMENTS……..……6

TRADING SYSTEM………………………………………………………….………8

STOCK MARKET INSTRUMENTS……………………………………….……….14

FINANCIAL CRISIS…………………………………………………………..……16

INVESTMENT AND INVESTMENT PATTERN………………………..…..……..19

RULES & REGULATIONSGOVERNING

FOREIGN INVESTMENT IN IRAN…………………………………….………...21

IRAN’S BANKING SYSTEM………………………………………….…………..23

BANKING ASSETS AND LIABILITIES………………………………………….27

CHANLLENGES FACED BY BANKS OF IRAN…………………………………29

CORPORATE GOVERNANCE IN IRAN…………………………..……………..32

OTHER INFORMATION I WANT TO SHARE…………………………..………34

REFRENCES

3

ISLAMIC REPUBLIC OF IRAN

COUNTRY PROFILE

Islamic Republic of Iran | Jomhuri-ye Eslami-ye Iran

Historically known as Persia, Iran was one of the greatest empires of

the ancient world, which was frequently invaded. Iran's hereditary

monarch, Shah Mohammad Reza Pahlavi, fled the country in 1979

after decades of corrupt and authoritarian rule, and mounting

religious and political unrest. Exiled Ayatollah Ruhollah Khomeini returned to lead an

Islamic revolution and formed the world's first Islamic republic the same year. An eight-

year war with Iraq followed.

In the elections of 1992 and 1996, former president Akbar Hashemi-Rafsanjani's

support increased and at the presidential election of 1997 Mohammad Khatami,

Rafsanjani's cultural adviser, succeeded him. Khatami promised greater freedom and

tolerance and was supported mainly by women, younger voters and intellectuals.

In June 2005, Mahmoud Ahmadinejad, former mayor of the capital, Tehran, and famous

for his conservative approach and for rolling back reforms put in place by modernists

before him was elected president. He has not been shy of confronting the West and has

pushed ahead with a national nuclear programme that has brought international

condemnation.

4

FINANCIAL MARKETS AND INSTITUTIONS OF

IRAN

As of 2011, about 80% of the country's wealth was deposited with state banks and the

remaining 20% with private banks. Iran's financial institutions are:

Banks

Finance & Credit Institutions

"Gharz al-Hasaneh" Funds (Islamic non-profit granting funds)

TRADING SYSTEM

Trading in IME is based on open outcry auction using electronic trading platform, an

interaction of bids and offers made by the buying and selling brokers. Orders, already

placed by the clients, are entered in the system by the brokers sitting behind their

stations in the trading floor. The system processes the orders and executes the

transaction upon matching of the bid and offer prices.

TYPES OF FINANCIAL MARKETS AND

INSTITUTIONS

COMMERCIAL BANKS

Commercial banks are authorized to accept checking and savings deposits and term investment deposits, and they are allowed to use promotional methods to attract deposits. Term investment deposits may be used by banks in a variety of activities such as joint ventures, direct investments, and limited trade partnerships (except to underwrite imports). However, commercial banks are prohibited from investing in the production of luxury and nonessential consumer goods. Commercial banks also may engage in authorized banking operations with state-owned institutions, government-affiliated organizations, and public corporations. The funds received as commissions, fees, and returns constitute bank income and cannot be divided among depositors.

BOND MARKET

The Central Bank must obtain approval from the Majlis in order to issue participation papers. As at 2012, regulations for fixed income instruments oblige that a market maker always buys back the papers from the sellers in the secondary market at par value if there are no other buyers present.

5

TEHRAN STOCK EXCHANGE

The Tehran Stock Exchange (TSE) is Iran's largest stock exchange, which first

opened in 1967. The TSE is based in Tehran. As of May 2012, 339 companies with a

combined market capitalization of US$104.21 billion were listed on TSE. TSE, which is

a founding member of the Federation of Euro-Asian Stock Exchanges, has been one of

the world's best performing stock exchanges in the years 2002 through 2011. TSE is an

emerging or "frontier" market.

DERIVATIVES MARKET

As of 2009, the Iranian Oil Bourse was a spot market for petrochemical products mainly,

with plans to introduce sharia-compliant futures contracts for crude oil and

petrochemicals in the future. Trading takes place through licensed private brokers

registered with the Securities and Exchange Organization of Iran.

With help of Bahrain-based International Islamic Financial Market and New York-based

International Swaps and Derivatives Association, global standards for Islamic

derivatives were set in 2010. The ―Hedging Master Agreement‖ provides a structure

under which institutions can trade derivatives such as profit-rate and currency swaps.

OTC MARKET

In 2010, 5.5% of the Mobile Telecommunication Company of Iran shares were offered

on the Iranian Over-The-Counter (OTC) market, at a value of $396 million. This was the

largest IPO-to-date in the Iranian OTC equity market. In 2011, Pardis Petrochemical

Co., the largest producer of urea and ammonia in the Middle East, Amir Kabir

Petrochemical Co., Pasargad Bank, Yazd Alloy Steel Co. and Ravan Fanavar Co (a car

auto part manufacturing company) went all public.

SUKUKS

An Islamic Fixed income instrument, which looks similar to an asset-backed debt

instrument. As of July 2011 and for the first time since the law was passed 3 years ago,

Iranian companies such as Mahan Airlines and Saman Bank have respectively issued

$30 million and $100 million worth of this type of bonds. Iran will also issue $15 billion in

sukuk (Islamic Sharia-based) bonds in 2012 to be invested in the domestic oil industry

6

INSURANCE INDUSTRY

The Central Insurance (Bimeh Markazi Iran) company is in charge of regulating this

sector in Iran. Five state-owned insurance firms dominate the sector, four of which are

active in commercial insurance. The leading player is the Iran Insurance Company,

followed by the Asia Insurance Company, the Alborz Insurance Company and the Dana

Insurance Company. Insurance companies Asia, Dana and Alborz will be listed on the

stock exchange in 2009 after review and improvement in their financial accounts,

internal regulations and organizational structure nationwide. At the end of 2008, there

were 20 insurance firms active in the market, only 4 of which were state-owned (with a

75% market share). Alternate 2006-statistics give the market share for private insurance

companies at 54% and 46% for governmental insurance companies.

Parsian Insurance became the largest privately owned company to be listed on the

Tehran Stock Exchange in 2010. Parisan is the third largest insurance provider in Iran.

In 2008, the total insurance premiums generated in Iran were $4.3 billion. This is less

than 0.1% of the world’s total, while Iran has approximately 1% of the world’s

population. The insurance penetration rate is approximately 1.4%, significantly below

the global average of 7.5%. This underdevelopment is also evident in product diversity.

Approximately 60% of all insurance premiums are generated from car insurance. There

are about 14 million vehicles in Iran and 90 percent of them are insured (2012). Of the

10 million motorcycles that operate on Iran's roads only 2 million are insured. Also, 95%

of all premiums come from general insurance contracts and only 5% relate to life

products (against world average of 58% for life insurance in 2011). One of the defining

characteristics of the economy is entrenched high inflation (and expectations) thanks to

persistent monetization of fiscal deficits. This produces an environment in which no

prudent person would enter into a long-term savings contract. According to Business

Monitor International, unless and until economic policies in Iran change radically, the

reality of the insurance sector will fall a long way short of its potential.

Blood money was $67,500 in 2011, down from $90,000 a year before. Starting in 2012,

Iran is also insuring its own fleet of oil tankers.

.

7

ISLAMIC BANKING

In 2009 Iranian banks account for about 40 percent of total assets of the world's top 100

Islamic banks. Three of the leading four Islamic banks are based there; Bank Melli Iran,

with assets of $45.5 billion came first, followed by Saudi Arabia's Al Rajhi Bank, Bank

Mellat with $39.7 billion and Bank Saderat Iran with $39.3 billion. ―Iranian banks are still

the predominant Islamic banking players, holding seven out of the top 10 ranks and 12

of the 100,‖ the Asian Banker research group reported. According to CIMB Group

Holdings, Islamic finance is the fastest-growing segment of the global financial system

and sales of Islamic bonds may rise by 24 percent to $25 billion in 2010.

IRAN MERCANTILE EXCHANGE

Iran Mercantile Exchange (IME) is a commodities exchange located in Tehran, Iran. It

was founded in 2006. IME trades in agricultural, industrial and petrochemical products

in the spot and futures markets. It is mainly a domestic or regional market with the

ambition to become more international in the future.

OIL BOURSE

The Government of Iran decided to establish the oil and petrochemicals exchange and the responsibility of creating this new exchange was delegated to IME Company. The first phase was launched on February 17, 2008 by executing the transactions of petrochemicals and chemicals which has been running successfully and the second phase is on the verge of launching. With the completion of the second phase, crude and by-products of oil can also be traded on the exchange in both Iranian Rial and major foreign currencies (except USD).Kish Island is the venue for trading the oil contracts. It is a free trade zone. The Islamic Republic also wants to encourage local investors to participate in the oil market as it tries to reduce the state’s role in the country’s energy industry.

8

STOCK EXCHANGE OF IRAN & STOCK

MARKET INSTRUMENTS

TEHRAN STOCK EXCHAGE (TSE)

The Tehran Stock Exchange (TSE) is Iran's largest stock exchange. The TSE is based

in Tehran. The concept of stock industrialization dates to 1936, when Bank Melli,

together with Belgian experts, issued a report detailing a plan for an operational stock

exchange in Iran. However, the plan was not

implemented prior to the outbreak of World War II,

and did not gain traction until 1967, when the

Government revisited the issue and ratified the

"Stock Exchange Act".

Initially limited in size and scope, the Tehran Stock Exchange (the "TSE") began

operations in 1967, trading only in corporate and government bonds. Iran's rapid

economic expansion in the 1970s, coupled with a popular desire to participate in the

country's economic growth through the financial markets, led to a demand for equity.

The Government became actively engaged in the process, by granting shares to

employees of large state-owned and family-owned enterprises. Market activity

increased substantially, as both companies and high net worth individuals participated

in the new-found wealth associated with the TSE.

As of May 2012, 339 companies with a combined market capitalization of US$104.21

billion were listed on TSE. TSE, which is a founding member of the Federation of Euro-

Asian Stock Exchanges, has been one of the world's best performing stock exchanges

in the years 2002 through 2011.TSE is an emerging or "frontier" market.

The most important advantage that Iran's capital market has in comparison with other

regional markets is that there are 37 industries directly involved in it. Industries such as

the automotive, telecommunications, agriculture, petrochemical, mining, steel iron,

copper, banking and insurance, financial mediation and others trade shares at the stock

market, which makes it unique in the Middle East.

The second advantage is that most of the state-owned firms are being privatized under

the general policies of article 44 in the Iranian constitution. Under the circumstances,

people are allowed to buy the shares of newly-privatized firms.

9

MISSION

Launching a fair, efficient and transparent market equipped with diversified instruments

and easy

access to create added value for the stakeholders

VISION

The region's leading Exchange and country's economic growth drive

GOALS

Increasing the share of capital market in financing the economic productive

activities

Applying effective rules and procedures to protect the market's integrity and

shareholders' rights

Expanding market with the use of updated and efficient technology and

processes

Developing financial knowledge and improving investment and shareholding

culture in Iran

Facilitating market access by means of information technology

Observing accountability and transparency in cooperation with the stakeholders

Constant expansion of the company's intellectual properties and human

resources.

Attention to promotion of the private sector and new interest in the TSE brought life

back to the market. However, lack of regulation and out-of-date legal framework led

to crisis in the market leading to certain "meltdowns" until today. The market has

experienced its share of highs and lows in the past years including topping the World

Federation of Exchanges' list in terms of performance in 2004 to tumbling down to

last place in 2007 due to political uncertainties in the region.

10

ROLES OF TSE

Legislation establishing Tehran Stock Exchange (TSE) was formally enacted in 1966

and TSE began operation on April 6, 1967. Forty years after the establishment of the

TSE, a new Securities Act was passed in November 2005. Under this Act, TSE have

been demutualized.

As defined in the Article of Association, TSE's primary roles are:

Establishing, organizing and managing of the Stock Exchange in

order to trade listed securities

Listing of securities

Prescribing membership requirements for members and

supervising their performance, and regulating their activities

overseeing the transactions of the Exchange listed securities

Monitoring the performance of issuers of the listed securities

Processing and disseminating the information regarding the securities orders and

transactions of securities

TRADING PLATFORM

The Tehran Stock Exchange (TSE) has started an ambitious modernization program

aimed at increasing market transparency and attracting more domestic and foreign

investors. Concrete measures that have been taken in the planning and operations of

the stock exchange such as the settlement system, geographical expansion, new

exchange laws in order to attract local and foreign capital. The TSE has installed the

new trading system which has been purchased from Atos Euronext Market Solutions

(AEMS) in 2007.

The new system makes it possible to purchase and sell stocks on the same day. The

system has also made it possible for 2,000 brokerage stations to work simultaneously,

while the number was just about 480 in the past. The rise in electronic dealing, non-stop

input and updated data on orders, transactions and indices are among other features of

the new system. The new system has made it possible to link the stock market to the

international bourses. The bourse can now handle 700 transactions per second and

150,000 transactions per day.

11

The trading system is an order driven system, which matches buying and selling orders

of the investors. Investors can place their orders with TSE accredited brokers, who

enter these orders into the trading system. Then, the system automatically matches buy

and sell orders of a particular security based on the price and quantity requirements.

The mechanism for which the price of equities is determined is as follows:

The best price (price priority)

Time of order priority

The trading system also generates and displays details of current and historical trading

activity, including prices, volumes traded and outstanding buy and sell orders. This

ensures that investors have the required information to be able to take informed

investment decisions.

The range of price movements is typically

restricted to 3% daily either way from last

closing. Restriction on Rights is 6%. This

can be changed in specific situation by the

Board of the TSE in case of unusual price

movements resulting in an extremely high

or low P/E ratio. Short selling is not

permitted. There are no minimum trading

lots. According to the Iranian Commercial

Law, companies are prohibited from share

repurchases. TSE Services Company

(TSESC), who is in charge of the site, supplies computer services. TSESC is a member

of Association of National Numbering Agencies (ANNA).

Starting March 2011, investors will be able to trade in the Iranian stock market through

the Internet from anywhere in the world (on a trial basis since July 2010), or get all the

necessary information before traveling to Iran. There are 87 online service providers

which offer round-the-clock information and services about Iran and its stock market. As

of September 2011, 40,000 shareholders are registered and conducting transactions

online.

The Government of Iran directly holds 35 percent of the TSE, while securing another 40

percent through pension funds and investment companies such as the Social Security

Investment Company, one of the largest institutional investors on the TSE. Bonyads

also play a leading role in TSE trading. In 2005 fewer than 5 percent of Iranians owned

stock.

12

The Government is promoting the shareholding culture in Iran. By March 2010, 3.219

million shareholders had registered in the TSE, with investment firms having 562,375

shareholders, which make it the "favorite industry" in the stock market. By September

2011, the number of registered shareholders in the TSE had increased to 4.5 million.

HISTORICAL HIGHLIGHTS

The Tehran Stock Exchange commenced operation on Feb. 4. 1967

Trade of Treasury and Land Reform bills started. 1969

Stocks of 23 companies and three bonds were traded at TSE. 1972

The law for Usury-Free Banking was enacted. Trading in bonds was

abandoned. 1983

Eight-year war between Iran and Iraq came to an end. 1988

Sharp increase in trade from the beginning of autumn. 1989

TSE admitted as a full member of the International Federation of

Stock Exchanges. 1992

TSE joins the Federation of Euro-Asian Stock Exchanges as one of

its founding members. 1995

Capital market physical development occurs; principal steps in

dissemination of information, education and development of financial

products.

2002

Listed companies are allowed to issue corporate bonds 2003

The TSE new law is ratified by parliament. Increase the number of

Regional floors to 21. 2005

TSE Demutualization is accomplished 2006

Launching Privatization Plan of State-Owned Companies 2007

Establishment of SMEs Market (Iran Farabourse) in the Capital

Market 2008

Foreign Investment Deregulation – Launching Single – Stock Futures

Market and On-line Trading Services – Being Elected As the

Chairman of FEAS Until 2012

2010

Launching A New Derivatives Product: Embedded Put Option 2012

13

2011: The best performing industries in 2011, in terms of total sales, were the banking

and automotive sectors. The worst performers were home appliances and electronics.

In terms of gross profit margin, mining, telecommunications, and oil and gas exploration

& production were the best performing industries. Sales totals of the top 100 Iranian

companies on the list ranged from $12.8 billion or the top ranking company, Iran

Khodro, to $318 million for the 100th company.

2012: Companies showing the most profit, are mostly in pharmaceutical, petrochemical

and steel businesses. The sharp decline of the Rial in 2012 has made exports more

competitive. Other favoured companies are state-owned industrial companies that rely

on a mostly domestic supply chain, turning locally-produced raw materials into products

targeting Iranian consumers.

OVERVIEW OF TURNOVER

No. Shares Traded

(million) Daily

(million $)

July-09 20,256 100.7

Aug-09 5,747 53.9

Sep-09 3,202 35.8

Oct-09 4,669 56.7

Nov-09 26,675 436.3

Dec-09 1,547 19.8

June-10 17,837 112.7

116,562 (total) 93.83 (average)

CENTRAL SECURITIES DEPOSITORY OF IRAN

(CSDI): CSDI is responsible for clearing, settlement, depository, and registry (CSDR) or all post-

trade activities for the Iranian Capital Market. All securities are held in immobilized or

dematerialized forms. The CSDI is going to act as the central counterparty (CCP) of all

trades in the future. For TSE, a central securities depository with the records of the final

shareholders of all listed companies is maintained.

14

LEGAL STRUCTURE

The new Securities Act which is more comprehensive and advanced than the previous

one was passed on November 16, 2005 by the Iranian parliament to support investors'

rights and aimed at organizing, preserving and developing a transparent, fair and

effective market.

Under the new Act, the Securities & Exchange High Council (Council) and the

Securities and Exchange Organization (SEO) were introduced and created as

regulators of Iranian capital market and TSE has been demutualized i.e. the

membership organization entity was turned into a public joint stock company.

The Council is the highest authority and is responsible for all related policies, market

strategies, and supervision of the market. The Chairman of the Council will be the

Minister of Economy & Finance; other members are: Minister of Commerce, Governor

of the Central Bank of Iran, President of the Chamber of Commerce, Attorney General,

Chairman of SEO, representatives of the active market associations, three financial

experts requested by the Minister of Economy & Finance and approved by the Council

of Ministers, and one representative from each exchange.

The SEO will be responsible for administration and supervisory duties, governed by the

Board of Directors. The SEO's Board of Directors will be elected by the Council.

IRANIAN CAPITAL MARKET

15

FUNDS MANAGEMENT

As of 2009, 21 mutual funds managed by permitted brokerage firms and investment

banks are investing in the TSE according to the investment funds regulation. Mutual

funds are open ended and their

operation permission is issued by the

Iran Securities and Exchange

Organization (SEO). Since then, 41

funds have been established, four of

which are fixed income funds and the

remainder of which are equity funds. As

of August 2010, total assets under

management within the Iranian fund

management industry amount to

approximately $230 million with great

potential for development. As of

December 2010, TSE had a market

capitalization of $84 billion. TEDPIX,

TSE's Price and Dividend Index, became the world’s second-best performing equity

index in 2010.

2012: TSE’s overall index hit a new record high in October 2012 surpassing 31,000

points. Export-oriented companies have been favoured because of a sharp decline in

the value of the Iranian rial over 2012

FOREIGN PORTFOLIO INVESTMENT

The performance of the TSE has had no

correlation with major exchanges or

emerging stock markets over the past few

years and not even with the oil price. So far,

the Tedpix index has been driven by

domestic investors, including wealthy

Iranians, public sector pension funds and

the investment arms of state-owned banks.

For the index to prosper in the long run,

more foreign investors need to make

significant share purchases. As at 2009,

foreign portfolio investment accounts for

only about 2 percent of the stock market in Iran.

16

STOCK MARKET INSTRUMENTS

OTC MARKET

Since 2009, Iran has been developing an over-the-counter (OTC) market for bonds and

equities (aka Farabourse). Its shareholders include the Tehran Stock Exchange

Corporation (20%), several banks, insurance companies and other financial institutions

(60%), and private and institutional shareholders (20%). As of July 2011, Farabourse

has a total market capitalization of $20 billion and a monthly volume of $2 billion. The

OTC Market has been formed to promote the issuance and trade of various financial

instruments and remove the existing gap that inhibits the financing of industrial firms via

the securities market.

BROKERS

Trading takes place through licensed private brokers registered with the Securities and

Exchange Organization of Iran. Thirty-one of the 88 brokerages active in the TSE are

licensed to trade the futures contracts. The leverage for futures contracts is set at 1-to-

10. TSE will only deal in the derivatives through electronic trading.

ELECTRONIC TRADING

Starting March 2011, investors will be able to trade in the Iranian stock market through

the Internet from anywhere in the world (on a trial basis since July 2010), or get all the

necessary information before traveling to Iran. There are 87 online service providers

which offer round-the-clock information and services about Iran and its stock market. As

of September 2011, 40,000 shareholders are registered and conducting transactions

online.

TRADING FEES

As of July 2010, trading fees include:

Equities and rights: 0.55% payable by the sellers and 0.5% the buyers.

Participation bonds: 0.1% of transaction value payable by both the buyer and

seller with a maximum of 100 million IRR.

17

NEW PRODUCTS AND SERVICES

Presently, TSE trades mainly in securities offered by listed companies. Equities and

Corporate Bonds are being traded at TSE at the moment. The plan is to introduce other

financial instruments in the near future. The introduction of project-based participation

certificates that bear a fixed annual return during the period of the project and promise

the final settlement of the profit at the date of its completion, has diversified the market.

FUTURES

In 2008, commodity Futures came onto the Iran Mercantile Exchange (IME). In July

2010, TSE introduced six single-stock futures contracts based on Parsian Bank and

Karafarin Bank, which will expire in two, four and six months. Thirty-one of the 88

brokerages active in the TSE are licensed to trade the futures contracts. The leverage

for futures contracts is set at 1-to-10. TSE will only deal in the derivatives through

electronic trading. In the TSE’s derivatives market, over 13,200 single stock futures

contracts were traded in 2011 with a value of over 510 billion Rials.

OTHER FINANCIAL INSTRUMENTS

18

FINANCIAL CRISIS

IRAN'S EXTERNAL DEBTS CUT BY $10B, HIT

$7.2B: CENTRAL BANK CHIEF Report by Tehran Times

Iran's external debts decreased by $10 billion in the past Iranian calendar year, which ended on March 20, IRNA quoted Iran's Central Bank Governor Mahmoud Bahmani as saying on Sunday. The external debts stood at $7.2 billion compared with $17.3 billion in the year which ended in March 2012, he added.

He put the liquidity growth rate at 30.8 percent in the past year and said that liquidity

decreased by 1.9 percent in the first Iranian calendar month compared with the last

month of the past year.Meanwhile, Bahmani said that nothing more can be done to curb

inflation, the Tasnim News Agency reported.

"The [inflation] rate is very high. But, what can we do? We did our best to reduce the

inflation, but that was all we could do," he said.Last year, the central bank paid 1.956

trillion rials (about $155 million) in financial facilities, 31.7 percent of which was paid to

the production and industry sector, he noted.

... Payvand News - 05/27/13 ... --

19

JAPANESE BANK FREEZES IRANIAN ASSETS By Michiyo Nakamoto in Tokyo

One of Japan’s biggest banks has frozen assets belonging to the Iranian central bank

after an order from a US district court which is pursuing Tehran for $2.6bn in

compensation awarded to victims of a 1983 bomb attack on US marines in

Lebanon.Bank of Tokyo Mitsubishi UFJ moved after receiving the order this month but

submitted an objection to the New York court on the grounds that it does not have

jurisdiction over assets held in Japan.

Japanese banks recently won an exemption from US sanctions which come into force

on July 1. After that date the US will have the power to impose sanctions on any

commercial banks handling Iranian imports if the country they belong to has not

―significantly reduced‖ the volume of oil imports from Iran.

Additional reporting by Ben McLannahan, Tokyo.

IRAN'S CENTRAL BANK TO ISSUE LARGER

BANKNOTES, DONYA SAYS By Ladane Nasseri

Iran’s Central Bank plans to issue banknotes with twice the value of the largest ones in

circulation, Donya-e-Eqtesad reported, citing Majid Saniei, an official at the financial

institution. The bank will start printing 200,000-rial ($16) banknotes as soon as it

receives permission from the Economy Ministry and will release the new notes into

circulation in the Iranian new year starting March 21, the Tehran-based daily quoted

Saniei, head of Iran’s security and minting organization, as saying.

The Central Bank is also seeking approval for 500,000-rial notes and plans to introduce

these in two years’ time, Saniei said. Iran’s largest banknote at the moment is 100,000

rials. The rial has weakened in the past year as the Persian Gulf country battles U.S.

and European Union economic sanctions which have contributed to an inflation rate

nearing 30 percent. Iran’s Central Bank estimates inflation will rise to between 30.6%

and 31.5% in the Iranian month of Esfand ending March 20, Central Bank Governor

Mahmoud Bahmani said last month. Iran is at loggerheads with Western powers over its

nuclear program.

20

UK SUPREME COURT RULES AGAINST BAN ON

IRAN'S BANK MELLAT Britain’s Supreme Court has overturned a ruling against Iran's Bank Mellat over its

alleged links to Tehran's nuclear energy program.

On Wednesday, the highest British court ruled that the UK government was wrong to

have imposed sanctions on the Iranian bank in 2009, and that the Treasury directive

was ―irrational‖ and ―disproportionate.‖

The decision comes after the European Union

General Court decided in January to quash

sanctions imposed against Bank Mellat in July

2010. Bank Mellat has stated that it will explore

legal channels and sue individual governments

for the damages it has suffered as a result of

sanctions. The illegal US-engineered sanctions

were imposed based on the unfounded accusation that Iran is pursuing non-civilian

objectives in its nuclear energy program. The Court ordered removal of Bank Saderat

sanctions on Wednesday saying that the EU has failed to provide evidence that the

bank is involved in Iran's nuclear energy program has also been the target of anti -Iran

sanctions.

Iran Rial Crisis: Currency Fall Leads To Tightened

Measures

By ALI AKBAR DAREINI and BRIAN MURPHY

TEHRAN, Iran -- Iranian authorities used aggressive measures Wednesday in an attempt to halt the nosedive of the country's currency, making arrests, vowing to stamp out sidewalk money changers and warning merchants against fueling the mounting public anger over the economy.

There were unconfirmed reports of sporadic violence. Associated Press photos showed riot police blocking a street with the charred hulks of a garbage can and a motorcycle that had been set on fire. Smoke was rising from the area in central Tehran near the main bazaar.A declining currency causes shifts in an economy such as making imported goods more expensive.

Although the currency crisis is blamed on a combination of factors – including internal government policies – the rush to dump rials appears to reflect an underlying perception that international sanctions have deepened problems such as runaway inflation and soaring prices for imports and that the only safe hedge is to grab dollars or euros.

21

INVESTMENT AND INVESTMENT PATTERN

REASONS TO INVEST IN IRAN

A unique geographical location at the heart of a cross-road connecting the

Middle East, Asia and Europe, coupled with many inter- and trans-regional

trade, customs, tax and investment arrangements;

MARKET POTENTIALS AND PROXIMITY

Vast domestic market with a population of 68 million growing steadily as well as

quick access to neighboring markets with approximately 300 million inhabitants;

22

ABUNDANT NATURAL RESOURCES

Varied and plentiful reserves of natural resources ranging from oil and gas

to metallic and non-metallic species reflecting the country’s accessibility to

readily available raw materials;

INVESTMENT LEGISLATION

Enactment of the new Foreign Investment Promotion and Protection Act (FIPPA)

to substitute the former Law Concerning Attraction and Protection of Foreign

Investments in Iran (LAPFI) by providing full security and legal protection to

foreign investments based on transparency and international standards.

23

RULES & REGULATIONSGOVERNING FOREIGN

INVESTMENT IN IRAN

The legal corpus governing foreign investment in the Islamic Republic of Iran

constitutes the Foreign Investment Promotion and Protection Act ( FIPPA) and

the FIPPA’s Implementing Regulations, as well as legislation applicable for

the establishment and conduct of economic activities in the country. While

the prospective investors are recommended to get full knowledge about the

legislation directly related to their interest, they are also advised to get familiar

with certain legislation which is fundamental in their daily affairs, such as

laws pertaining to companies formation and administration (Commercial Code-

Company Law); registration of companies, branches and representative

offices; import/export regulations; taxation; industrial and intellectual property

protection; status of foreign nationals ( entry, resident and work permits); banking

and insurance; free and special economic zones regulations, etc.Since 1955, the

legal framework of Iran’s foreign investment regime was defined under the Law for the

Attraction and Protection of Foreign Investments (LAPFI). Moreover, in line with

reforms in the overall economic framework, Iran’s parliament undertook to propose and

approve a plan concerning a new foreign investment law entitled: The Foreign

Investment Promotion and Protection Act (FIPPA) which was ratified in May 2002.

FIPPA replaced the LAPFI which was in effect since 1955. FIPPA’s replacement of

LAPFI has further enhanced the legal framework and operational environment for

foreign investors in Iran.

Some specific enhancements introduced by FIPPA for foreign investments in Iran can

be outlined as follows:

Ä Broader fields for involvement by foreign investors including in major

infrastructure;

Ä Recognition of new modes of foreign capital exposure in addition to Foreign

Direct Investment, e.g. project financing, Buy-Back arrangements and

BOT schemes;

Ä Streamlined and fast-track investment licensing and approval process;

Ä Creation of a one-stop institution called the ―Center for Foreign Investment

Services‖ at the Organization for Investment, Economic and Technical

Assistance of Iran (OIETAI), for focused and efficient support of foreign

investment undertakings in Iran;

Ä Further liberalization of foreign exchange mechanisms as enjoyed by foreign

investors;

24

Ä Introduction of new legal options governing the Government-Investor(s)

relations.

Clearly, the ratification of the FIPPA and the approval of its implementing regulations by

the Council of Ministers represented a significant complement to a whole host of

reforms taking place in Iran’s general macroeconomic framework and structural

mechanisms. The trend in foreign investment applications in Iran since the ratification

of the FIPPA demonstrates that the new economic environment and the enhanced

foreign investment legal and regulatory regime have tapped a great foreign investment

potential for Iran that can be realized at a more accelerated pace through a concerted

effort aimed at transparent communication of the latest status of Iran’s dynamic

economic and foreign investment framework.

The Government of the Islamic Republic ofIran welcomes foreign investment in all

areas of economic activity by foreign persons including real persons as well

as juridical entities. In accordance with Article (1) of the FIPPA, the term

Foreign Investor is defined to be natural persons and legal entities as wells

Iranian nationals and companies either residing in Iran or abroad. The

foreign investors by importing capital as defined in a very broad and

diversified form, being in cash or in kind, or being machinery and equipment,

raw materials, parts, specialized services as well as intellectual property for the

purpose of investment in industry, mining, agriculture and services shall be

eligible to enjoy the privileges and facilities provided under the FIPPA. The

advantages and facilities shall be granted to foreign investors who obtain

the Investment

License. In general, foreign investment in Iran is free for all investors but such

facilities and privileges are only granted to those investors who seek the

FIPPA's coverage by way of submission of an application to the OIETAI, which

is the central government agency to receive, license and protect the

interests of foreign investors throughout the lifetime of their operation in

Iran, notwithstanding the type and the manner of investment.

In fact, the interests and rights of foreign investors under the FIPPA are fully

recognized and secured against non-commercial risks which would simply

commit the Iranian Government not only to facilitate the free flow of

capital repatriation but also the full and fair compensation against acts of

Government towards expropriation as well as interruption of activities of the

foreign investors. Under FIPPA, foreign capital is defined in a very broad and

diversified manner and can be in cash or in kind, being machinery and equipment, raw

materials, parts, specialized services as well as intellectual property.

25

IRAN’S BANKING SYSTEM

INTRODUCTION

The pre-revolutionary banking system in Iran was dominated by western patterns. By

1979, there were 36 banks operating in Iran including many internationally joint-

ventures banks. Following the Islamic Revolution (1979), as a result of the transfer of

deposits abroad, and problems in collecting outstanding debt, most of the private banks

were left in a precarious position.

Consequently the need for an effective administration of the newly nationalized banks

and thereby achieving uniformity in rendering newly adopted Islamic banking services,

granting credit facilities and adopting a unified policy in other key economic, financial

and monetary areas, necessitated the grouping of the newly nationalized banks into two

main categories. Therefore, in early 1980 the 36 banks were merged into 9 banks

comprising of 6 commercial and 3 specialized banks.

Concurrent with nationalization, studies were also being made on Islamization of the

banking system, which culminated in the Law on Usury-Free Banking ratified by the

Parliament in 1983.

Today Iran's banking system is still dominated by 11 state-owned institutions, including

seven commercial banks and four specialized banks, which jointly hold approximately

85% of the Iranian banking sector. In addition, there exist six private banks, two private

credit institutions, a growing number of credit co-operatives and three Free Zones

based branches of foreign banks.

Presently, a major initiative is underway for privatization and modernization of the

Iranian banking industry. In line with new macroeconomic policies of the government,

banks are gradually reducing interest rates, introducing new banking services and

expanding their international network.

Government debt to the banking sector is low, estimated at about 3% of GDP and 30%

of budget revenues in 2007 and is mostly domestic. All domestic debts are denominated

in local currency. The growth of credit granted to the private sector is expected to

remain strong, as it has been for several years, rising from 35% of GDP in 2001 to an

estimated 51% of GDP in 2005. The inflow of oil revenues inevitably adds liquidity to the

financial system. Certain banking reforms permitting an increase in financing are also

responsible for higher rates of consumption and private investments.

26

Lending and deposit rates of state-owned banks are still set annually by the Monetary

and Credit Council, but the share of new credit that state-owned banks are allowed to

allocate themselves increasing, and currently stands at 45% with different ceilings for

specific sectors in line with the adjectives set out in the prevailing five year development

plan.

Iran banking system comprises of central bank, commercial banks and other financial

institutions like insurance, mutual funds. Besides that Iran also have a well structured

Islamic banking system.

COMMERCIAL BANK

Commercial banks are authorized to accept checking and savings deposits and term

investment deposits, and they are allowed to use promotional methods to attract

deposits. Term investment deposits may be used by banks in a variety of activities such

as joint ventures, direct investments, and limited trade partnerships (except to

underwrite imports). However, commercial banks are prohibited from investing in the

production of luxury and nonessential consumer goods. Commercial banks also may

engage in authorized banking operations with state-owned institutions, government-

affiliated organizations, and public corporations. The funds received as commissions,

fees, and returns constitute bank income and cannot be divided among depositors.

Further the commercial bank includes the following types.

Specialized government Banks includes

27

CENTRAL BANK OF IRAN

The Central Bank of the Islamic Republic of Iran (CBI)

(Persian: بانک مرکزی جمهوری اسالمی ايران , Bank Markazi Jomhouri Islami Iran) is the central

bank of Iran. It is entirely

government owned. Among

its major purposes are:

maintenance of the value of

the national currency,

balance of payments as well

as facilitating trade transactions and contributing to the economic advancement of the

country.

The Central bank is in charge of laying and implementing monetary and credit policies

of the country. Laying exchange policies and determining exchange rates are among

the functions of Bank Markazi. The importation of goods, issuance of documentary

credits and registration of orders for documentary bills of exchange for imports are also

done in accordance with the policies of the Central Bank. It is a member central bank of

the Asian Clearing Union.

According to the Monetary and Banking Law, rectified at 18 Tir 1351 and the

amendments thereto, the organs of the Bank Markazi Jomhuri Islami Iran are as follows:

- General Assembly

- Money and Credit Council

- The Executive Board

- The Note Reserve Control Board

- The Supervisory Board

28

ISLAMIC BANKING

In 1983 the Islamic Banking law of Iran was passed by the Majlis. According to this law, Iranian banks can only engage in interest-free Islamic transactions (interest is considered as usury or riba and is forbidden by Islam and the holy book of Qur’an). These are commercial transactions that involve exchange of goods and services in return for a share of the assumed "profit".

Iran uses what are officially termed "provisional" interest rates, as rates paid to

depositors or received from borrowers should reflect the profits or losses of a business.

Under these rules, deposit rates, known as "dividends", are in theory related to a bank's

profitability. In reality, however, these dividends have become fixed rates of return—

depositors have never lost their savings because of losses made by the banks and

almost never received returns larger than the provisional ex-ante profit rates. Interest

charged on loans is presented as "fees" or a share of corporate profits.

All such transactions are performed through Islamic contracts, such as Mozarebe,

Foroush Aghsati, Joale, Salaf, and Gharzol-hassane. Details of these contracts and

related practices are outlined in the Iranian Interest-Free banking law and its guidelines.

This law describes and authorizes an Iranian Shiite version of Islamic commercial laws.

Iran’s banking system adheres to Islamic rules that prohibit earning or paying interest.

Having commenced its activities some three decades ago, the Islamic Banking system

has enjoyed favorable growth and attracted the attention of many investors and bankers

around the world. Instead of paying "a fixed interest", which is forbidden in Islamic law,

Islamic banking shares its profit and loss with customers. In this system, although the

banks offer their clients on account interest, this is rate may vary depending on the

bank's performance by the end of the fiscal year.

Based on this system, a bank has a close link with its clients and they make joint

projects to sell to a third party. What is focused in Islamic banking is the objective of

Fixed Usury Free Banking for establishing social justice, which tends to be the first

objective of Islamic economic system.

In fact, in usury-free banking system, the focus is the applicant's purpose. For each

contract, a special technique is devised, in a way that firstly, the clients and the bank

are not forced to pay or receive interest and secondly the profitability levels of the

contract are also considered. In the Islamic banking system, the banking transactions

have, therefore, been presented in the form of contracts.

29

BANKING ASSETS AND LIABILITIES

DEBT: The government's and banks' debts to the central bank dropped from

905,926 billion Rials (about 90 billion Dollars) in November 2008 to about

776,486 billion Rials (about 77 billion Dollars) in November 2009. According to

CBI reports, the value of its assets fell by 11.6 percent during the last 12 months

to 1,137,455 Rials in November 2009. Meanwhile, the total debt of 11 state-run

banks alone to the Central Bank of Iran has exceeded $32 billion in 2009,

showing a 10-fold increase over the past four years. Bank Melli Iran, with nearly

$9 billion, had the biggest debt followed by Bank Sepah, Iran's oldest, with about

$4.8 billion. Bank Maskan, Keshavarzi Bank, Bank of Industry and Mines and the

Export Development Bank of Iran were next with the respective debts of $4.7,

$4.1, $3.5 and $1.1 billion. Private-sector banks had much lower debts. Bank

Parsian, the largest private-run bank, owed about $421 million to the Central

Bank. In addition, the collective debt of state-sector companies to the Central

Bank has reached $25 billion (2009).

30

OVERDUE LOANS: According to unofficial figures, overdue loans have reached

IR175,000bn ($17.8bn, €13.6bn, £11bn), an increase of 75 per cent over three

years (November 2008. Plan to inject about $13 billion to recapitalize the banking

sector (2008). Ninety individuals have managed to secure collective facilities

totaling $8 billion from Iranian banks, with previous $27 billion unpaid loans

(2009). In October 2009, Iran's General Inspection Office informed that Iranian

banks have some USD 38 billion of delinquent loans, while they are only

capitalized at USD 20 billion. Current average for late debts of Iran's state banks

is over 15 percent while the global standard is 3 to 5 percent.

SHETAB BANKING SYSTEM

The Shetab (Interbank Information Transfer Network) system is an electronic banking

clearance and automated payments system used in Iran. The system was introduced in

2002 with the intention of creating a uniform backbone for the Iranian banking system to

handle ATM, POS and other card-based transactions.

Prior to its introduction, some Iranian banks were issuing cards that only worked on the

issuing banks ATMs and POS machines. Since the introduction of Shetab, all banks

must adhere to its standards and be able to connect to it. Furthermore, all issued credit

or debit cards must be Shetab capable. As of the end of 2003, the Shetab system had

2,926 ATMs and 16,070 POS units connected to it.

31

CHANLLENGES FACED BY BANKS OF IRAN

On 25 October 2007, the United States imposed unilateral sanctions against Iran.

These sanctions include new measures to reduce Iran’s ability to conduct

financial transactions between the state-owned banks of Iran and United States

citizens or private organisations. Bank Melli was included in these sanctions, on

the grounds that, besides its other customers, Bank Melli provides financial

services to Iran’s nuclear and ballistic missile programmes. A fact sheet released

by the US Treasury Department also asserts that between 2002 and 2006 Bank

Melli sent at least $100 million to Hamas, Palestinian Islamic Jihad, and other

groups, via the Quds Force, a branch of the Iranian Revolutionary Guard.

Critics believe that the Iranian Interest-Free banking law has simply created the

context for legitimizing usury or riba. In reality all banks are charging their

borrowers a fixed pre-set amount at a rate of interest that is approved by the

Central Bank at least once a year. No goods or services are exchanged as part

of these contracts and banks rarely assume any Commercial Risk.

At the beginning of 2012, the US and the EU imposed sanctions on Iran’s oil and

financial sectors with the goal of preventing other countries from purchasing

Iranian oil and conducting transactions with the Central Bank of Iran. The

sanctions entered into force last summer.

Britain’s Supreme Court has overturned a ruling against Iran's Bank Mellat over

its alleged links to Tehran's nuclear energy program. On Wednesday, the highest

British court ruled that the UK government was wrong to have imposed sanctions

on the Iranian bank in 2009, and that the Treasury directive was ―irrational‖ and

―disproportionate.‖ The decision comes after the European Union General Court

decided in January to quash sanctions imposed against Bank Mellat in July 2010.

One of Japan’s biggest banks has frozen assets belonging to the Iranian central

bank after an order from a US district court which is pursuing Tehran for $2.6bn

in compensation awarded to victims of a 1983 bomb attack on US marines in

Lebanon. Bank of Tokyo Mitsubishi UFJ moved after receiving the order this

month but submitted an objection to the New York court on the grounds that it

does not have jurisdiction over assets held in Japan.The legal action also targets

the assets of other Iranian entities with accounts held by BTMU.

32

Iran's external debts decreased by $10 billion in the past Iranian calendar year,

which ended on March 20, IRNA quoted Iran's Central Bank Governor Mahmoud

Bahmani as saying on Sunday. The external debts stood at $7.2 billion compared

with $17.3 billion in the year which ended in March 2012, he added.

The banking system’s credit to

GDP ratio, a standard indicator of

the depth of bank intermediation,

is the second highest among

seven comparator emerging

market countries considered in

this study. Iran’s density of

companies listed on the local

stock exchanges is the highest

among comparators. However,

while the government’s

privatization program has helped boost market capitalization, trading remains

subdued due to the still limited free-float and the absence of mutual funds until

2009.

The depth of banking increased by 50 percentage points for the ratio of credit to

GDP, and by 60 percentage

points for the credit to non-oil

GDP ratio between 2001 and

2010. This growth occurred

largely between 2001 and 2005,

when private banks were

licensed for the first time since

1979. The expansion of private

banks coincided with relatively

attractive bank intermediation

spreads (the difference between

lending and deposit rates).

Intermediation spreads narrowed in the second half of the decade through

greater competition, followed by government attempts to boost bank lending

against the background of the increasing isolation of Iran’s economy and

dwindling access to foreign sources of capital. The narrower spreads of 2006-10

led to a pause in banking sector expansion.

33

IRANIAN FINANCIAL INSTITUTIONS are barred from directly accessing the

U.S. financial system, but they are permitted to do so indirectly through banks in

other countries. In September 2006, the U.S. government imposed sanctions on

Bank Saderat Iran, barring it from dealing with U.S. financial institutions, even

indirectly. The move was announced by Stuart Levey, the undersecretary for

treasury, who accused the major state-owned bank in Iran of transferring funds

for certain groups, including Hezbollah. Levey said that since 2001 a Hezbollah-

controlled organization had received 50 million U.S. dollars directly from Iran

through Bank Saderat. He said the U.S. government will also persuade European

banks and financial institutions not to deal with Iran. As of November 2007, the

following Iranian banks were prohibited from transferring money to or from United

States banks:

Bank Sepah

Bank Saderat Iran

Bank Melli Iran

Bank Kargoshaee (aka Kargosa’i Bank)

Arian Bank (aka Aryan Bank)

In other words, these banks were placed on the Office of Foreign Assets Control

(OFAC) Specially Designated Nationals List (SDN List). The SDN List is a directory of

entities and individuals who have been prohibited from accessing the U.S. financial

system. Although difficult there are ways to carry out an OFAC SDN List removal.

As of early 2008, the targeted banks, such as Bank Mellat, had been able to replace

banking relationships with a few large sanction-compliant banks with relationships with

a larger number of smaller non-compliant banks. The total assets frozen in Britain under

the EU (European Union) and UN sanctions against Iran are approximately 976,110,000

pounds ($1.64 billion). In 2008, the US Treasury ordered Citigroup Inc. to freeze over $2

billion held for Iran in Citigroup accounts.

34

CORPORATE GOVERNANCE IN IRAN

To ensure sustainable human development, actions must be taken to work towards this

ideal. Major donors and international financial institutions, like the IMF or World Bank, is

increasingly basing their aid and loans on the condition those reforms ensuring good

governance are undertaken.

The most important above factor is accountability that is a concept in ethics with

several meanings. It is often used synonymously with such concepts as answerability,

responsibility, blameworthiness, liability and other terms associated with the expectation

of account-giving. As an aspect of governance, it has been central to discussions

related to problems in both the public and private (corporation) worlds.

In politics, and particularly in representative democracies, accountability is an important

factor in securing good governance and, thus, the legitimacy of public power.

Accountability differs from transparency in that it only enables negative feedback after a

decision or action, while transparency also enables negative feedback before or during

a decision or action. Accountability constrains the extent to which elected

representatives and other office-holders can willfully deviate from their theoretical

responsibilities, thus reducing corruption. The relationship of the concept of

accountability to related concepts like the rule of law or democracy, however, still awaits

further elucidation.

Social responsibility is a doctrine that claims that an entity whether it is state,

government, corporation, organization or individual has a responsibility to society. This

responsibility can be "negative," in that it is a responsibility to refrain from acting, or it

can be "positive," meaning a responsibility to act. Corporate social responsibility (CSR)

is an expression used to describe what some see as a company’s obligation to be

sensitive to the needs of all of the stakeholders in its business operations. In my view,

there are many misconceptions surrounding the subject. For example, I feel it is

dangerous to conclude, as some have, that Iranian firms have lost their edge, that

inadequate corporate governance is the villain, and that the large pension funds have a

magic key to success. Certainly there have been compensation excesses and

management failures, but overreaction to them entails its own dangers.

However Tehran Stock Exchange (TSE) has been published draft of CG Bylaw and

Admission& Inspection Manual of listed audit firm. So it is important that everyone,

business and government alike, consider all sides of this complex issue and learn

everything we can, before adopting radical change.

35

According to this draft all big listed Co. shall behave audit committee under

responsibility of one of non-executive managers. For the first time this draft have been

review some matters as follow:

• Partner Rotation-Transition Questions

• Audit Partner and Partner Rotation-Other Matters

• Non-audit Services

• Audit Committee Pre-approval

• Audit Committee Communications

• Fee Disclosures

• "Cooling Off" Period

A company’s stakeholders are all those who are influenced by, or can influence, a

company’s decisions and actions. These can include (but are not limited to): employees,

customers, suppliers, community organizations, subsidiaries and affiliates, joint venture

partners, local neighborhoods, investors, and shareholders (or a sole owner).

The relationship among the CEO, top management and the board of directors is a

complex and a fascinating subject, which has developed over many decades. As we

know from reading the papers, it continues to evolve. That's due at least partially to the

growing presence of big institutional investors.

Also, individual investors' greater awareness of issues and events has increased public

scrutiny of management on both financial and societal issues. Boards of directors today

are much more actively involved in company matters than they used to be. Generally, I

think increased board involvement is a positive development in company management.

If a board nominee is not prepared to be an active, inquiring, participating director, he or

she should decline the offer to serve. But board members, who attempt to

micromanage, assume management's authority or exercise authority without attendant

responsibility can be a negative factor. Demands on the chief executive have

multiplied. A broad spectrum of societal issues has become an important matter of

everyday business concern (the environment, diversity of workforce, etc.) At the same

time, competition has intensified and become global, increasing pressure on

management for financial results, raising the stakes on decisions, and narrowing the

tolerance for mistakes.

These trends mean the CEO needs all the wise counsel he or she can get. A board of

directors composed of able individuals with diverse backgrounds and experience, can

be a valuable ally to the CEO. This was certainly the case during Texaco's crisis period.

36

INFO I WANT TO SHARE

Iran’s new president, Hassan Rohani, has been hailed

abroad as a reformist breath of fresh air. But at home

he may still have to accommodate the crusty old guard Jun 22nd 2013 | TEHRAN

THE first-round victory on June 14th of Hassan Rohani, with almost 51% of the vote in a field of six candidates, stunned both Iranians and the world at large. In the run-up to the contest, the most conservative of the candidates, Saeed Jalili, was widely tipped as the favourite. The supreme leader, Ayatollah Ali Khamenei, who has the final say in all crucial matters of state, would—it was surmised—look on with approval, perhaps with vote-rigging officials poised to enforce the desired result, as they did last time round, in 2009, when the country was thrown into a year-and-a-half of turmoil.

Mr Rohani, a 64-year-old cleric, campaigned on a platform of engagement with the West (including on nuclear issues) and an easing of restrictions at home. Though he has served at the heart of the establishment for many years, he was plainly the most liberal of the eventual runners, though all of them had been vetted by the Council of Guardians, a clutch of clerics and lawyers, to ensure their fidelity to the tenets of the Islamic revolution of 1979. It helped Mr Rohani that the so-called ―principlist‖ bloc of the four most conservative candidates, led by Mr Jalili, failed to rally around one man.It is also generally assumed that he will back Syria’s embattled president, Bashar Assad, to the hilt, as his predecessor and the ruling establishment have done. Much store will continue to be set on strengthening the Shia axis that now stretches from southern Lebanon, where Hizbullah, a Shia party-cum-militia, reigns supreme, through Syria under its Alawite rulers, and across to Iran from Iraq, under the thumb of an increasingly s e c t a r i a n S h i a l e a d e r .

37

Iranian tycoon claims EU sanctions are unfair

By Fardad Fahrazad BBC Persian

Meeting in a car park in Dushanbe: Babak Zanjani

gives a rare interview to BBC Persian Iranian

billionaire businessman Babak Zanjani has amassed

the kind of fortune that could qualify him for a place

on Forbes rich list. Instead he is on an EU sanctions

list, accused of facilitating illicit oil deals for the

Islamic Republic.

The EU said he was helping Iran to get round international sanctions by selling oil abroad and channelling the profits back via his Malaysia-based First Islamic Bank.Mr Zanjani is adamant that he has been wrongly accused.

"I didn't buy Iranian crude oil. I was buying low quality fuel oil to sell to Malaysia," he said.

"The US and the EU have exempted several countries from the sanctions on Iran, Malaysia is one of them."

China floods Iran with cheap consumer

goods in exchange for oil

With the Islamic republic increasingly cut off from global markets due to sanctions, Beijing is in a Rush-hour traffic in Tehran. China is angling for a large slice of the consumer market in Iran, including cars.

A stone's throw from the former grounds of the British embassy, left vacant after a hostile takeover by anti-western demonstrators in late 2011, the new headquarters of the Geely brand is the second Chinese automobile manufacturer in Iran. Another company, Chery Motors, has been active here for five years, and produces several of its low-range vehicles on Iranian assembly lines.

38

Small business owners are not the only ones losing out. In a country where the state plays a significant role as an employer, the outsourcing of major infrastructure projects to Chinese businesses takes construction and engineering jobs away from the already struggling local labour pool. Over the past two decades of fortifying bilateral ties, Chinese engineers have spearheaded countless infrastructural projects, most prominently the Tehran metro system – a trend both Iranian and Chinese officials have been keen to encourage.

"The new agreement seems to be, no more consumer goods. If we're going to barter, build us motorways, bridges and dams," said the Sino-Iranian trade analyst.

As Iran's inflation and unemployment levels climb, the growing visibility of Chinese workers at public construction sites is thus likely to further foment public resentment. Presently, the massive expansion of Tehran's Sadr expressway – touted as a pre-election achievement of the mayor, Mohammad Qalibaf – may give enough cause for local ire. Easily the most visible infrastructural endeavour in Tehran, the two-level, four-mile project is sponsored by China.

Close your mouth like a diver in the sea

Only under water can fish remain free.

39

REFRENCES

1. http://www.zawya.com/researchmonitor

2. http://data.worldbank.org/country/iran-islamic

3. Capital for the Future Author: The World Bank

4. Global Monitoring Report 2013 Authors: World Bank; International Monetary Fund

5. World Development Indicators 2013 Author: World Bank

6. Building Better Policies The Nuts and Bolts of Monitoring and Evaluation Systems

Gladys Lopez-Acevedo, Philipp Krause, and Keith Mackay,

7. "Commercial Government Owned Banks". Central Bank of the Islamic Republic of

Iran. Archived from the original on 9 February 2010. Retrieved 2010-01-31.

8. "Iran opens bank to support cooperatives". PRESSTV. Retrieved 2009-08-06.

9. financial Services Forecast", Economist Intelligence Unit, August 18, 2008

10. "Iran to launch investment banks". Payvand.com. 2006-11-22. Retrieved 2010-02-15.

11. Iran Banking and Financial Market Handbook, ISBN 1-4387-2384-9, International

Business Publications, USA (March 20, 2010)

12. Iran Investment Monthly SUMMARY OF THE ASSETS AND LIABILITIES OF

PUBLIC AND PRIVATE BANKS IN IRAN - Annual report by the Central Bank of

Iran (includes official statistics about the OTC bond market in Iran)

13. Laws and regulations relating to the Iranian Banking sector Bank Supervision -

Central Bank of Iran.

14. Islamic Republic of Iran: IMF Staff Report – Statistics on the banking sector and

macro-economic projections by the International Monetary Fund (March 2010)

15. Economist Intelligence Unit: Financial Services Report - Iran (March 2010)

16. BMI: Iran Commercial Banking Report (56-page report, 2009)

17. BMI: Iran Insurance Report (72-page report, 2012).

18. Tehran Stock Exchange: FACT BOOK. Retrieved July 31, 2010.

19. The History of Iran by Elton L. Daniel 2nd Ed.

40

20. Iran: the Looming Crisis: Can the West live with Iran's nuclear threat? By Dr

Emanuele Ottolenghi.

21. "Iranian Banks Under Sanctions: Government Looking Towards Foreign Banks".

Payvand.com. Retrieved 2012-02-08.

22. Iran’s SHETAB system to be connected to Chinese banksIRAN: FIRST E-BANK

OPENS IN TEHRAN. Industry & Business Article - Research, News, Information,

Contacts, Divisions, Subsidiaries, Business Associations

23. Iranian National Bank. "Economic Trends No 62, Third Quarter 1389 (2010/2011),

Balance of Payments, p.16"

24. Mobile Banking, Challenges and Strategies in the Banking System of Iran Amir

Ghotbi, Nazanin Nassir Gharechedaghi Department of Information Technology,

Shahid Beheshti University, Tehran, Iran

25. 2011 International Monetary Fund August 2011 Islamic Republic of Iran: Selected

Issues Paper.

26. Nasseri, Ladane (2008-05-27). "Iranian Exchange to Start Commodity Futures in

July; Oil Later". Bloomberg. Retrieved 2010-08-27.

27. Payvand.com: How U.S. Laws Can Affect Your Personal Affairs in Iran Retrieved

January 4, 2010.

28. "Tehran Exchange Trades Futures to Attract Investors". BusinessWeek. 2009-12-08.

Retrieved 2010-07-29.

29. BUSINESS WIRE: ATOSEURONEXT TO PROVIDE SYSTEMS TO TEHRAN

STOCK EXCHANGE. Retrieved August 2, 2010.

30. Turquoise Partners: Iran Investment Monthly (February 2011) Retrieved April 30,

2011.

31. Taghavi, Roshanak; Margaret Coker (2009-08-06). "Tehran Struggles to Defend

Currency". Wall Street Journal: A7.

32. In Iran, Stocks Are a Haven As Economy Hits the Skids. Wall Street Journal , 30

October 2012. Retrieved November 4, 2012.

33. Iran's Economic Conditions: U. S. Policy Issues By Shayerah Ilias.

34. Iran Company Laws and Regulations Handbook By Ibpus.com, International

Business Publications, USA.