Iran will issue 3 billion euros' worth of bonds domestically to develop its giant South Pars Gas field, an official said on Friday, the latest move by the Islamic state to raise funds as it faces foreign sanctions. The head of National Iranian Oil Co. said it would be the first time Iran is offering international bonds to domestic investors, the Oil Ministry's website SHANA reported.
"From Saturday, for five days we will issue bonds inside the country for the first time in order to develop the gas field," deputy Oil Minister Ahmad Qalebani said, without elaborating on why the bonds would be issued in foreign currency.
Analysts say international credit conditions have made it difficult for the Islamic Republic to raise funds abroad because of tightening United Nations', US and European Union sanctions on Tehran over its disputed nuclear plans.
Iran's banks are under pressure because Western banks and export credit agencies, which have been a source of credit lines particularly in trade, have been exiting Iran due to sanctions.
Major credit ratings agencies Fitch, Standard & Poor's and Moody's do not rate Iran because the sanctions bar foreign investors from holding Iranian bonds.
The bonds, with four years of maturity, will have an interest rate of up to 8 percent, the official said. The state oil firm has estimated annual investment needs at $25-30 billion in Iran's oil and gas sector.
Iran has the world's second-largest gas reserves after Russia but international sanctions have slowed the development of its energy sector.
Iranian officials have repeatedly downplayed any effect of sanctions on the Islamic state.
Iranians living abroad would also be able to purchase the bonds for the development of offshore South Pars field, Qalebani said. "The scheme is expected to be widely welcomed by the investors as an appealing investment opportunity," he said.
However, an economist, who did not wish to be named, said he did not see Iranian investors "having much debt appetite because of the sanctions and uncertainty over Iran's political future." Iran's 2009 presidential election, which the opposition says was rigged to secure President Mahmoud Ahmadinejad's re-election, created a rift among the ruling elites that is deepening.
Ahmadinejad is facing growing criticism over his economic policies but his supporters say Iran has held up relatively well in the face of the global economic downturn.
Western firms are wary of investing in the Islamic state for fear of sanctions. The West is putting further pressure on Iran over its nuclear programme, which Tehran says is for peaceful purposes but which the West suspects is aimed at making arms.
Iran has increasingly shifted to Asian countries to develop its oil and gas fields. State-owned Asian firms are less susceptible to Western pressure to stay away from the Iranian market and are eager for energy supplies from the Islamic state to feed their fast economic growth.