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Iran Central Banker Says Much-Needed Hard Currency Earnings Stay Abroad

File photo - Abdolnasser Hemmati, Governor of Central Bank of Iran.

The Governor of the Central Bank of Iran (CBI) says that 150 Iranians involved in exporting goods have not returned billions of dollars of their revenues to the country. "Sadly, there is no accurate record available concerning them," Abolnasser Hemmati complained on Tuesday, July 16.

Without any elaboration, Hemmati insisted that, in a formal letter, the CBI has reported the list of the names of these exporters to the Islamic Republic judiciary.

As U.S. sanctions have severely reduced Iran’s access to hard currencies, the state has come up with an elaborate system of providing cheap U.S. dollars or euros to those exporters who pledge to return 70 percent of their hard currency earnings to the country.

But two trends have been visible in the past year. First, many exporters prefer to safeguard their earnings abroad rather than bring back their capital and keep it in the crisis-ridden Iranian economy. Second, the scheme offered by the government is a unique chance for well-connected people to buy cheap dollars or euros and take their often ill-gotten wealth out of the country.

The fact that Hemmati has highlighted a letter sent to the Judiciary indicates the Central Bank wants to legally pursue all these individuals or businesses, but it has probably received little help from the country’s law enforcers. This is a possible red flag indicating powerful people might be getting away with taking hard currencies with a favorable rate from the government and moving money out of the country.

The same scheming takes place in the import of essential goods. As the local currency devalued, prices for food and essential goods were bound to skyrocket, leaving the majority in total destitution. Therefore, the government offered even cheaper dollars to importers for pre-approved goods.

But in a matter of weeks it became apparent that the mechanism was being used by well-connected persons for getting their hands on cheap hard currencies and never importing “essential goods”.

Iran’s Minister of Industry, Mines and Business said last August that fluctuations in the local forex market in the previous four months tripled the number of applications for import licenses worth $250 billion dollar.

Describing the figure as “unbelievable”, he insisted that a “number of” profiteering individuals are trying to “fish in troubled waters”, referring to the current currency and economic crisis.

The figure of $250 billion was almost triple of Iran's annual oil income prior to U.S. sanctions. This was obviously the result of inflated currency requests.

In May 2018, research center of the Iranian parliament reported that $59 billion had left Iran from 2016-2018 Iran, most of it because of fears the United States would pull out of the 2015 nuclear agreement and sanctions would return.