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Strong oil boosts Iran's economy, cheers investors

LONDON, Sep 28 (Reuters) - Strong oil prices have lifted key crude producer Iran onto solid economic ground and built confidence in potential international investors, a senior Iranian official said on Thursday.

``Oil revenues are more than 60 percent higher during the first quarter of 2000 versus the same period last year,'' Iranian Central Bank Governor Mohsen Nourbakhsh said at Iran Invest in London. He was referring to the first three months of the Iranian year which began on March 21.

Oil prices hovering at decade highs of around $30 a barrel have left producers raking in profits while raising the alarm in consuming nations.

The huge influx of petro-dollars has allowed Iran -- OPEC's second biggest producer -- to balance its books during the first quarter and push its trade account surplus to $2.7 billion, he said. GDP growth this year is projected at about four percent, Nourbakhsh added.

These encouraging economic prospects could well boost Tehran's standing in international financial circles.

The Central Bank chief insisted Iran was still keen on a $500 million Eurobond issue, targeted mostly at Europe.

Iran first expressed an interest in tapping international debt markets several months ago, but bankers do not expect the issue to emerge until 2001.

``That is definitely a market we would like to be in,'' Nourbakhsh said. ``That way we would have access to the capital market.''

He declined to be drawn on the timing of the issue -- Iran's first foray into international capital markets since the 1979 Islamic revolution. But the Central Bank chief said talks were underway with dealers to handle the issue.

``We are working on the documents,'' Nourbakhsh said. ``Everything must be harmonised with the Central Bank.''


Higher oil earnings have knocked down Iran's external debt to $10.4 billion this year from $14 billion during 1998-1999 when low oil prices created economic turbulence, Nourbakhsh said.

``By any standards this level of debt is too low,'' he said, adding that external debt now accounts for less than 10 percent of the country's GDP. ``We need more access to external financing to achieve the growth objectives set out in our third five year plan.''

Although Iran is reaping the benefits of robust oil prices, the country still has obstacles to overcome along the road to economic reform.

``Our immediate challenge is unemployment,'' said Nourbakhsh. ``We must get our young graduates into the labour market through expanded economic activity.''

Robust oil prices pushed Iran's economic growth to 3.2 percent last year, Nourbakhsh said. But the country needs six percent economic growth and a rise of more than seven percent in investment to create 3.6 million jobs for its booming young population over the next five years.

Nourbakhsh repeated that stability in the oil market is crucial for both consumers and producers. But he said there must be symmetry between the two groups. Nourbakhsh said OPEC had done its part by recently agreeing to increase production by 800,000 barrels per day (bpd).

He called on industrialised countries to reduce their tax on fuel.


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