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Iran considers bailout as stock market falters

Falling prices of oil and commodities have hurt businesses in a lackluster economy under sanctions.

December 19, 2008|Borzou Daragahi and Ramin Mostaghim | Mostaghim is a special correspondent.

BEIRUT AND TEHRAN — Iran is considering a $300-million financial bailout plan for companies listed on its weakened stock market, a newspaper reported this week, as share prices falter for businesses hurt by sagging oil and commodity prices.

According to a report Tuesday in the daily Kargozaaran, the chief of the Tehran Stock Exchange is pressing the government to put up cash to stop the collapse of the stock market, which has dropped to a five-year low since oil prices began plummeting this fall.

The newspaper revealed few details about the bailout plan, and no official could confirm the discussions between exchange chief Ali Saleh Abadi and President Mahmoud Ahmadinejad's administration. The Kargozaaran is close to the camp of former President Hashemi Rafsanjani, a relative moderate and an Ahmadinejad rival.

The TEPIX, an index measuring the performance of Iranian companies on the stock market, which was as high as 11,000 just two months ago, has fallen below 8,700.

"Confidence in the market has dropped and the phobia of what may come has brought our stock market to a standstill," said Mahmoud Sadri, 47, a writer for the World of Economics, an Iranian daily.

News of Iran's financial woes could be music to the ears of Western policymakers who might hope that the global economic gloom will sharpen the effect of years of international sanctions on Tehran. Those measures are aimed at pressuring Ahmadinejad's government to end its nuclear enrichment program, which the United States and its allies allege is a step toward developing atomic weapons.

Iranian officials say that though the sanctions may weaken the country's economy and hurt ordinary people, they will only harden the Shiite Muslim nation's resolve to pursue nuclear technology, which it says it wants only for peaceful purposes.

But an ailing economy might hurt Ahmadinejad's chances in elections this June and help the prospects of more moderate factions.

Until recently, Iranian officials boasted that the country's economy and equity markets were unconnected to international markets and immune to the contagion plundering share prices and slowing economies throughout the world.

Despite the global slowdown, economists estimate that Iran's oil-revenue-dependent economy will grow by 6% this fiscal year, which ends in three months. But they estimate it will slow to 3.5% during the next fiscal year. Fears of a long worldwide recession have precipitated a drop in commodity prices that is expected to hurt the bottom line of Iranian companies.

Most of the companies trading in Iran's $300-billion stock market deal in metals, petrochemicals, construction supplies, automobiles and energy -- especially oil and gas, the lifeblood of the Iranian economy.

"As oil prices dropped, it was clear the stock market would be affected because many companies in the stock market are receiving petrodollars," said Saeed Leylaz, an economist often critical of the Ahmadinejad government. "As the price of steel and petrochemicals in the international market has dropped, the shares here plummet too."

Iranian banks haven't cut off credit lines, as many banks have in the West, but Iran is suffering its own liquidity crunch as merchants hoard money and curtail spending in anticipation of better deals.

"Those who have money prefer to save it in cash and buy goods next year, as they have the perception that next year the goods will be cheaper," said Bizhan Bidabadi, an Iranian economist.

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daragahi@latimes.com

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