The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Iran: Oil leaves Iran high and dry

Ideologically the US and Iran are far apart, but economically they are uncomfortably linked. As the US recession spurs an oil-price crash, Iran’s populist financial policies might be set to face substantial obstacles.

What international sanctions against Iran were not able to achieve might come about through a funding crisis.

The oil boom helped the Iranian government to bolster its popularity with cash handouts. Partly because of this, imports ballooned to almost $50 billion during the past Iranian year. Imports rose 20% during the first quarter of the present Iranian year (which began on March 21) compared with the same quarter the previous year, according to the latest central bank figures.

Conventional economics would say this growth in imports has made Iran’s home industry less competitive, creating an advanced form of Dutch Disease dependency.

With a presidential election due in summer 2009, the oil boom might have ended too soon for President Mahmoud Ahmadinejad. Iranian oil revenue might not have been significantly affected yet by the oil-price crash, as some price agreements made before the price fall are likely still to be in force. However, by mid-2009, spot prices of $40 a barrel and lower, together with lower expected prices, will certainly have begun to kick into the state’s revenue stream, as oil is exported under lower price agreements.

Iran’s government knows that its financial difficulties will be watched with attentive glee by its diplomatic foes.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree