Iran presents budget to counter 'cruel' US sanctions

TEHRAN - President Hassan Rouhani on Tuesday unveiled Iran's first annual budget since the return of US sanctions, saying it had been adjusted to take account of Washington's "cruel" measures.

The president announced a 20 percent increase in public sector wages in a sign of the economic challenges the Islamic republic has faced since the United States pulled out of the 2015 nuclear deal earlier this year.

The speech gave only a few general points of the budget -- which will now be scrutinised and voted on by parliament -- but acknowledged the pressure Iran was under.

"Last year we faced some problems," Rouhani told parliament in a televised speech, referring to the widespread protests that hit the country almost exactly a year ago, sparked by anger over economic and political conditions.

"Those events caused the Americans to change their position regarding the Islamic republic and the nuclear deal," he said.

"The real objective of the US in all of this conspiracy and sanction and pressure... is to bring the powerful Islamic republic of Iran to its knees," he said, vowing that the US "will definitely be defeated."

The renewed US sanctions include an embargo on Iran's crucial oil sector.

The new budget did not say how many barrels of oil Iran hopes to sell in the next financial year, which starts in late March, but analysts believe it will be considerably less than the approximately 2.5 million it sold per day prior to Trump's withdrawal.

The US granted waivers to eight key buyers of Iranian oil -- including China, India and Turkey -- though this has been a double-edged sword for Iran since it also helped push down the global price.

Forex 'practically zero'

Rouhani came to power in 2013 representing the more moderate side of Iran's ruling elite, hoping a compromise on the country's nuclear programme would reduce tensions with the West and allow foreign investment to boost the stunted private sector.

The return of sanctions has ended that hope, and forced Rouhani more towards the self-sufficient "resistance economy" preferred by supreme leader Ayatollah Ali Khamenei.

Concern over the economy pushed many Iranians to secure their savings in dollars and gold, triggering a run on the Iranian rial, which has lost around half its value since Trump announced the pullout.

"At one point early this year our foreign exchange cash reserve was practically zero, forcing the government to take hard decisions to save the country," Rouhani told parliament.

The government has pressured exporters to return their dollars to Iran, and Rouhani said they would lose tax incentives if they failed to repatriate their cash.

The central bank has used the returning dollars to shore up the collapsing rial, which has recovered to around 110,000 per dollar on unofficial exchanges.

The rial's fall drove up prices across the board, with food and drink costs up 60 percent in the year to November according to the central bank.

The judiciary launched a fierce crackdown on currency speculators, dubbed "economic disruptors" that has seen dozens of traders put on trial and at least three businessmen executed.

The so-called "sultan of coins", Vahid Mazloomin, was hanged in October after being found guilty of amassing two tonnes of gold coins.

But sanctions and fraud are only part of the story in an economy with many long-standing problems.

Its banking sector is riddled with bad loans, while many key industries from oil and gas to construction are dominated by semi-state groups with opaque links to the government and military.

The budget was delayed several times in recent weeks, with reports that Khamenei had demanded unspecified changes to the final document.