Daily Warns Against Iran Economy’s Large Dependence on Oil Revenues

Text of report by reformist Iranian daily E’temad-e Melli

Tehran, 13 August: The punch line of economic models for single- product countries is that they can considerably quicken the process of non-reliance on mono-product policies.

Fundamentally, Iran’s economy relies on oil revenues. The extent of this dependence is so much that some experts believe that Iran’s oil should be named ‘black disaster’.

Since the discovery of oil in Masjed Soleyman, the dependence of Iran’s economy on oil sales has not decreased. On the contrary, it has increased on a daily basis and this process has gathered pace and accelerated. Based on this, when a national government with great ideals came to power, one its main mottos and strategies was the formation of an oil-free economy. Unfortunately this policy never materialized and compared to 50 years ago, the Iranian economy’s dependence on oil has increased. However, oil prices and its fluctuation are also very dangerous and worrisome.

During recent days, oil price dropped from 140 to 113 dollars in less than a week. This drop happened while three important events which traditionally were considered reasons behind the increase of oil prices occurred in the world. These events included the Beijing Olympic Games, the start of the summer season and an increase in global oil consumption, and most important of all the regional war between Georgia and Russia in the Caucasus.

However, we are not seeking an answer to the question why in face of the war in the Caucasus a strange event has taken place and oil prices have dropped rather than increase. At the end of the year 1385 [Iranian year beginning in March 2006], the oil price was 68 dollars. In the years 1377-78 [1998-99], when Khatami’s government was in power, this figure stood at eight dollars. The interesting point is that this summer oil prices reached the legendary figure of 140 dollars. Experts have announced that oil prices will probably drop and it’s not as if they will always remain over 100 dollars.

Now, we should ask the ninth government that in the face of its great reliance on oil revenues, what will happen if oil prices drop. Although the government can claim that it has drawn up the budget bill based on low figures, it cannot say what will happen to Iran’s economy in face of frequent withdrawals from the Foreign Exchange Fund, the occasional presentation of rotating amendments to the annual budget bill and the lack of transparency in announcing the true amount of the Foreign Exchange Fund. The government has initiated the implementation of an economic revolution which is completely dependent on oil revenues.

The objective behind discussing this issue is to merely remind officials that oil is not a loyal friend and companion. Be careful that you don’t drop to the bottom of the well by solely using oil as a rope!

Endall

Originally published by E’temad-e Melli, Tehran, in Persian 13 Aug 08.

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