Iranian President Hassan Rouhani appeared before parliament on Aug. 28 to defend his government’s handling of Iran’s economic crisis. (MEHR)

November 13, 2019

The share of crude oil in Iran’s next year budget (beginning March 21) has dropped to zero, Mehr news agency reported November 12. The report coincided with the Islamic Republic parliament’s closed-door session on Tuesday, debating ways to reduce the dependency of the country’s budget on oil revenues.

The report, if confirmed, shows that Iran’s income from selling crude has significantly dropped under U.S. sanctions and has forced President Hassan Rouhani’s administration to seek other sources of income to draft next year’s budget.

Meanwhile, Mehr also says in its report that Iran’s oil income is set to be allocated to public works projects.

Furthermore, it has also been decided that all government expenses should be reviewed and decreased to the least possible amount.

In the meantime, Rouhani said on Tuesday that his country’s situation has never been as “difficult and complicated” as it is today. Rouhani admitted that U.S. sanctions on Iran’s oil exports are making it difficult to run the affairs of the country.

The remarks are in sharp contrast to Rouhani’s previous statements in which he presented an optimistic outlook for the country’s economy. In recent months, he and his senior aides have said repeatedly that the country’s economy was growing, the inflation rate was on a declining curve, and non-oil exports were making up for lost oil sales.

Iran’s Islamic Consultative Assembly, Majles or parliament, has so far had several sessions behind closed doors to weigh next year’s budget and to find new revenue sources to replace oil income.

Selling oil has always been the primary source of income for the Islamic Republic governments.

Nevertheless, immediately after the parliament session on Tuesday, the spokesman of its leadership board, Assadollah Abbasi, said that the country’s next year budget should be based on taxes, selling state bonds and privatization of state-owned companies.

The government’s 4,480-trillion-rial ($40 billion) budget for the current fiscal year (March 2019-20) is based on selling 300,000 barrels of oil per day (bpd), the deputy head of Plan and Budget Organization had said earlier.

Hamid Pourmohammadi claimed on July 26 that by adopting several budget reforms, the government had paved the way for reducing its reliance on oil revenues.

But the government’s nominal budget tells just part of the story. There are many state-owned companies and foundations with direct links to the Supreme Leader’s administration or the Revolutionary Guards, with opaque financial dealings and secret budgets. There is also Iran’s financial backing of its proxies in the region, which is never part of the official budget. Iran still needs to finance the non-transparent part of its expenditures.

Last year’s (fiscal 2018-19) budget was based on the sale of 1.5 million bpd and that of fiscal 2017-18 was conditional on selling 2.68 million barrels of oil per day, the official was cited as saying by Mehr.

“The Islamic Republic rose to the occasion in face of U.S. sanctions and reduced national costs and boosted revenues. By introducing structural reforms”, the official said. However, Rouhani admitted on Tuesday, “Although we have some diverse revenues, the only income that can keep the country going is the oil money.” He added that there is at least a $15-billion-dollar budget shortfall.

That is just the official figure about the transparent part of the budget. The real shortfall might be much bigger.

“Where should we seek the rest?” Rouhani demanded.

Iran’s oil exports have declined from more than 2 million barrels a day to less than 300,000 under U.S. sanctions.

The former chairman of Majles National Security Affairs and Foreign Policy, Heshmatollah Falahatpisheh, disclosed on November 5, “Iranian crude oil exports are currently twenty times less than what it was before sanction was imposed by Washington.”

Although Falahatpisheh did not pinpoint the volume of crude oil currently exported by Iran, his reference to the term “twenty times less” shows that it has dropped to 125,000 bpd.

RFE/RL

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Track PersiaTrack Persia is a Platform run by dedicated analysts who spend much of their time researching the Middle East, in due process we fall upon many indications of growing expansionary ambitions on the part of Iran in the MENA region and the wider Islamic world. These ambitions commonly increase tensions and undermine stability.