Out of currency devaluation comes….transparency?

Whilst the Iranian rial (IRR) has been hammered over recent weeks following the US withdrawal from the nuclear deal, the Iranian government has tried to reassure the public that it has no shortage of foreign currency. In response it has been offering foreign currency based on a US dollar rate of 42,000 IRR – nearly half the actual market value – to importers of foreign goods.

Meanwhile the rise in prices and devalued currency have been causing public unrest. In a push for transparency and confronting suspected corruption, Minister of Communications and Information Technology Javad Azari Jahromi on June 25 published a list of companies that had been granted foreign currency at the beneficial government rate to import mobile phones. The list detailed the amount of currency given to each company for importing mobile phones and their expenditure for this purpose between March 21 and June 19, 2018.

Diligencia took a closer look at Jahromi’s list:

• The list included 40 companies; 30 of which are registered in Tehran, 7 in either Qeshm or Chabahar Free Zones and 3 in other cities.
• Nearly half the companies were established less than five years ago. For example, Espinans Tejarat Nikan Company, founded in 2017, received over 10 million EUR to import mobile phones and Hamrah Vision Communication Company, established in 2016, received over 15 million EUR. The oldest company on the list is Homa Telecommunication Development Company, which was established in 2002.
  According to Jahromi, the company that received the most foreign currency, Nodis Pardaz Company (over 26.5 million EUR), imported 20,000 iPhones and then sold 15,000 to another company for nearly 20 million IRR over the expected price per unit (roughly 500 USD at the government official rate). Jahromi said that an inspection report on Nodis Pardaz was sent to the authorities; according to Diligencia’s sources, companies that have been selling the imported mobile phones at rates above the government’s preferential USD rate must pay the difference to the government and may face fines.
• Indeed, according to reports by the official IRNA news agency, the main managers of 15 companies have recently been accused of misusing the allocated currency and are currently under arrest (see full list below). IRNA also reported that the suspects’ cases are being tried by the Revolutionary Court, which is mainly responsible for legal cases involving threats to national security – thus indicating the severity of the matter.
  
  

• The second largest recipient, Ima Hamrah Company, received over 20 million EUR at the government rate. A newly established business, lma Hamrah is mainly owned by the Abrishamchi family, which has been prominent in the telecommunications sector for over 10 years and is particularly known for importing Nokia products to Iran. In addition, one of Ima Hamrah’s sister companies, Karian Hamrah Company, received 13 million EUR at the government rate, meaning that the ultimate owners in fact received over 33 million EUR. It is interesting to note that the owners did not use a third sister company, Pars Microtel Company, a better known company that has been active for over a decade in the mobile phone sector.
• Media Pardazesh Chabahar Free Zone Company was the third largest recipient of foreign currency at the government’s preferential rate (nearly 22 million EUR). It was established in 2011 and is owned by the Deilami family, who are known for importing LG home appliances through Goldiran. According to Diligencia’s records, the Deilami family is also the owner of Alfa Motor Company which has been an agent of Alfa Romeo in Iran.

It is often said in the West that the Iranian telecommunications sector is significantly influenced by governmental or parastatal organisations, such as the IRGC. However, according to Diligencia’s records, the companies on the list released by Jahromi are owned by private individuals and do not have direct shareholding links to such organisations. Notwithstanding, sources have suggested that some of these companies are owned by individuals who are well-connected to the government, although this cannot readily be confirmed by Diligencia.

Jahromi’s action pushed the government towards increasing transparency with regards to public funds. As such, the Iranian central bank published a comprehensive list of importers in other sectors who received foreign currency at the government’s preferential US dollar rate, except the automotive sector. Nonetheless, after public pressure the Ministry of Industry, Mines and Trade in the end published a similar list on automotive importers. Diligencia is now working to map these companies.