Tuesday, 27 November 2012

The Latest from Iran (27 November): Trying to Escape the Oil Squeeze

0618 GMT: Domestic news is still limited because of the holidays for the holy month of Muharram, but one economic item caught the eye on Monday --- from Fars News Agency:

Iran plans to decrease its reliance on oil revenues in its next year state budget to one million barrels a day, a senior Iranian legislator announced, adding that the country will try to increase its income in the non-oil export sector, instead.

"Apparently, the government wants to decrease the 1392 (the next Iranian year starting on March 21) state budget's reliance on oil exports to one million barrels a day," member of the parliament's Budget Planning Commission Gholamreza Mesbahi Moqaddam told FNA on Monday. 

He said that the parliament is not concerned about deficiency in the 1392 state budget due to the western oil sanctions for the country sees crude embargos as an opportunity to reduce or even cut the country's reliance on oil exports. 

Many Iranian officials believe that the West's ban on Iranian oil supplies will help Iranian economy end its dependence on oil revenues. 

"The sanctions imposed on us have created an opportunity to prepare the ground for cutting the connection between the (country's) budget and oil (revenues)," Vice-Speaker of the Iranian Parliament Hassan Aboutorabi-Fard said at an economic conference here in Tehran in March. 

At the same time, Iran's First Vice-President Mohammad Reza Rahimi said that the country plans to boost its non-oil exports to $70bln in the next Iranian year. 

"The government targets $70 billion of non-oil exports in 1391 (March 20, 2012-March 20, 2013)," Rahimi said. 

The Government's optimism that it can live with a sharp reduction in oil revenue may be sorely tested. In 2011, Iran exported 2.2 million barrels per day, more than double than the revised amount for 2013/14, and a drop of more than 60% in oil sales would mean --- at 2011 prices, which were lower than those today --- a fall of more than $60 billion in income.

Meanwhile, development of the non-oil production sector has been limited by issues over government mismanagement and sanctions.

from EA WorldView: EA Iran

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