Sunday, November 13, 2005

Agenda: Close Tehran’s Stock Exchange!

Meysam Tavab, Rooz Online: Special Rooz Report
The continuing downfall in the trade of stocks at Iran’s Stock Exchange market at an unprecedented rate, particularly after president Ahmadinejad’s remarks on the state of Israel two weeks ago, have lead a number of government economic advisors to propose to the administration that they temporary close Tehran’s Stock Exchange Organization. READ MORE

The implementation of their recommendation, according to sources who have seen the report to the president but did not wish to be named, the proposal to close the Stock Market is recommended, unless something positive alters the course of the stocks trade in Iran in the next few weeks. By closing the market in the future rather than today, political observers interpret the timing to be aimed at disassociating the president’s remarks with the down-turn of the stock trades, in order to dampen the political consequences of the remarks. The president’s standing and credibility, low ever since he was elected because of his hardline positions on all issues across the board, plummeted even further when two weeks ago he made public remarks that Israel should be wiped off the map of the world.

On the other hand, Rooz has learned that economists close to the government are preparing a special report to president Ahmadinejad whose subject is the extraordinary consequences of his Israeli remarks on the Iranian economy. This decision follows a meeting that took place between representatives of the International Monetary Fund, IMF and the Governor of Iran’s Central Bank, where the representatives expressed their concerns about the direction Iran’s economy had taken over the past few months. The preparation of this report to the president was made in the presence of the Central Bank Governor who demonstrated through figures and reports that Ahmadinejad’s remarks about two week ago about “wiping off Israel off the map of the world” had accelerated the flight of capital from Iran to levels and rates that were unprecedented during the last 27 years! By the end of the discussions, the economists present at the meeting had decided that president Ahmadinejad need to have a report that would explain the impact of his remarks, among other trends, on the various indices and trends of Iran’s economy.

The decision to temporarily close the Stock Exchange follows the continuing downfall of the trades in, and market values of, company stocks at Tehran’s official stock exchange market through which most stock transactions in Iran take place, despite the many unsuccessful measures taken at the fiscal, monetary and even political levels to slowdown, let alone reverse, the trend. One of the first steps the administration took in its effort to stop the spiraling effect of the stock values was to purchase large volumes of stocks through government banks and cooperative lending institutions at its control. Even though the move was protested by economists and the press, the government went ahead with the measure, and as expected, the trends in the stock market were not affected by the purchases or such announcements.

As the economy continued to deteriorate, Iran’s powerful chamber of commerce recommended to the government a list of measures it should take to strengthen the sense of insecurity among the country’s investors who had been taking their money out of the various markets at an increasing and alarming rate. Among the recommendations was to slow down the radical changes that were being made to the economic sector. But the unexpected and massive changes in the management of all government banks that followed Ahmadinejad’s presidential victory had already produced a shock in capital market that seemed to be beyond control by such patchy measures.

The president’s remarks on Israel seemed to be the final straw for the stock market, leading to its complete collapse.

Iran’s stock market, which at one time in the not too distant past enjoyed remarkable buoyancy, is now considered to be among the most depressed in the Middle East by international economic circles. Iranian economists and observers have said that by temporarily closing the stock exchange, the complete discrediting and distrust of the market will be avoided. When the decision to close the market was being discussed, Ahmadinejad believed that the spiral trend of the stocks was a concocted plot against his administration, and thus a team lead by Danesh Jaafari and Tahmaseb Mazaheri, both government officials, were tasked to look into the market and come up with immediate measures that could positively affect the market. Mazaheri, who is currently in charge of the Ministry of Economy, gathered such a team and made specific recommendations and began implementing them, while Iran’s relations with the outside world deteriorated on a weekly basis, finally culminating in the president’s Israeli remarks which poured cold water on these measures. According to economists closely following Iran’s economic trends, closing the official stock market may be the best step to prevent a larger disaster that would be very difficult to rebuild, even though it will have its own political and economic damage.
A fascinating behind the scenes report into Iran's economic problems.