Iran's Ministry of Intelligence Reports Arrest of 14 Members of 'Disruptive Petrochemical Network'

The Ministry of Intelligence of the Islamic Republic states that its forces have dismantled 'one of the largest brokerage and disruptive networks of petrochemical products.' In a report published on its official website on Sunday, the Ministry estimated the financial violations of this network at 'approximately 500 billion tomans' and stated that in addition to discovering 10,000 tons of petrochemical products, 14 main members of this network have been arrested and referred to the judiciary. The ministry's announcement noted that 'due to the actions of disruptors and brokers, the petrochemical market has been turbulent in recent months, and the prices of food and textile industry products have increased fivefold; however, with the actions of the Ministry of Intelligence, we are now witnessing a decreasing trend in prices in this market, which continues.' The announcement indicated that this illegal network operated extensively, especially in the provinces of Tehran, Razavi Khorasan, Gilan, Qom, Mazandaran, Golestan, Kohgiluyeh and Boyer-Ahmad, and Qazvin, aiming to create artificial demand in the market. Petrochemical products are sold on the stock exchange. The public relations office of the Iranian petrochemical industry published a report last month stating that the commodity exchange has recently witnessed 'the rampant activities of brokers,' and the demand for petrochemical products in the commodity exchange is 'not real.' The report added that demand has increased 'more than threefold' compared to last year. The National Petrochemical Company of Iran, which regularly published detailed monthly reports until June of this year, has refrained from announcing details of its production, domestic sales, and petrochemical exports in recent months; however, statistics from the Trade Development Organization indicate that the country's petrochemical exports in the first half of this year were approximately 15.5 million tons, a 9 percent increase compared to the same period last year. However, in October, this figure suddenly surged, and total petrochemical exports in the first seven months reached 19.6 million tons, reflecting a 23 percent increase compared to the same seven months last year. Meanwhile, the public relations office of the National Petrochemical Company reported on October 24 that the country's petrochemical production in the first half of the year was 27.5 million tons, showing only a 2.6 percent increase compared to the first half of last year. In other words, the surge in exports has effectively tightened the domestic demand. The Islamic Republic has earned over $9 billion from petrochemical exports in the first seven months of the year, which, considering the rise in oil prices and consequently petrochemical products, shows a 34 percent increase compared to the same period last year. The share of petrochemicals in non-oil exports and 'hoarding' Petrochemicals account for approximately 37 percent of Iran's non-oil exports (excluding gas condensates), and in the context of oil sanctions, where the money from oil and gas condensate exports is blocked abroad, petrochemicals are the most important option for generating foreign currency. However, recent reports have also emerged about 'the rampant activities of petrochemical brokers in the commodity exchange' and 'the hoarding of petrochemical products.' ISNA reported on November 6 that one of the fundamental problems in the market in recent months has been the hoarding of certain petrochemical products by some brokers due to the price differences between these products in the stock exchange and the free market, leading to a shortage of raw materials. The report adds that 'speculators are refraining from transporting their purchased products and, given the high profit margins of the purchased products, are fully willing to pay the penalties for delayed transportation. Currently, the warehouses of petrochemical companies, especially polypropylene producers, are full, and companies are forced to store sold products in the streets of the petrochemical site.' At the same time, Fariborz Karimi, the deputy of the Petrochemical Employers' Association, told ISNA that 'the issue of hoarding has been resolved by preventing brokerage and rent-seeking.' The petrochemical company’s information site also recently reported that the Ministry of Industry, Mine and Trade has a system called Behinyab that announces the names of approved petrochemical buyers for conducting transactions on the commodity exchange: 'After transactions are conducted on the commodity exchange, the details of sellers and buyers are again reported to the Ministry of Industry, Mine and Trade. With increased oversight, better utilization of the Behinyab system can be achieved so that brokers cannot enter commodity exchange transactions.'