No 'serious dent' from sanctions - Iran Central Bank

No ‘serious dent’ from sanctions – Iran Central Bank

"We can't say that sanctions did not damage us. They did, but we thrashed out plans to control the damage and were able to avoid a serious dent to our economy," the central bank chief said in a rare interview.

November 22, 2012 9:09 by Reuters

Iran has avoided a “serious dent” to its economy from Western sanctions thanks to large gold reserves, high oil prices and reduced foreign imports, its central bank governor told Reuters on Wednesday.

Gold reserves were enough to last 15 years, Mahmoud Bahmani said.

He added that inflation was running at 20 percent but that there was no need to raise interest rates.

Western nations have imposed their toughest sanctions to date against Iran in an attempt to halt its disputed nuclear programme, causing the rial to plummet, inflation to jump and hundreds of thousands of Iranians to lose jobs.

“We can’t say that sanctions did not damage us. They did, but we thrashed out plans to control the damage and were able to avoid a serious dent to our economy,” the central bank chief said in a rare interview.

He was speaking on the sidelines of a summit of developing nations in Islamabad.

Despite the economic impact from the sanctions, Iran has not backed down from its nuclear programme and there were signs Tehran could be building up its capacity even further. That has sparked growing concerns in Israel, which has threatened to bomb Iranian installations.

Officials from six world powers — Britain, China, France, Germany, Russia and the United States – were meeting in Brussels on Wednesday to plan for a possible new round of talks with Iran, the latest effort to resolve a decade-long standoff.

Iran denies international accusations it is seeking nuclear weapons and has so far refused to meet demands to scale back its atomic activity, insisting on immediate relief from sanctions.

GOOD AS GOLD

To help protect its economy, Iran has built up its gold reserves over the last few years with its current holdings 12 times larger than five years ago, Bahmani said. He declined to give a specific amount since the government does not disclose such information.

“We believe that these reserves are enough for us for the next 15 years, even if we don’t import foreign gold,” he said through a translator.

The country’s official reserves, which include foreign currencies and gold, totalled $106 billion at the end of last year, according to the International Monetary Fund.

Some analysts believe the official reserves may have shrunk by several tens of billions of dollars this year because of sanctions.

In October, Iran prohibited gold exports without central bank approval, in an effort by the government to restrict outflows of wealth. The government also banned the export of about 50 basic goods, including wheat, flour, sugar and red meats, as well as aluminium and steel ingots.

Bahmani refused to speak about Iran’s foreign exchange reserves.

He added that Iran does not use its gold reserves as a bartering tool in exchange for foreign goods, despite sanctions that bar Tehran from using U.S. dollars and euros in financial transactions.

The sanctions have slashed Iran’s oil export earnings and triggered a rush by Iranians to change their savings into foreign currency, dragging the rial down by two-thirds in 15 months and boosting inflation.

Inflation in Iran was running at around 20 percent, Bahmani said.

“It’s a temporary high rate of inflation in Iran and we are trying our best to control the level and bring it down to its real value in the near future,” he said, adding he did not see a reason to raise interest rates.

High oil prices have helped limit the drop in revenue from lower crude exports. Bahmani said Iran did not want to see oil prices to rise further because of its potential impact on the global economy.