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Page added on December 28, 2015

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Iran moving away from ‘oil curse’

Public Policy

Iran is drifting away from an oil-centered economy greatly prone to spasmodic market volatility and turmoil, which has unfailingly stunted the country’s every bid for sustainable development.

At their peak, oil revenues have caused an outbreak of virulent economic maladies, including stagflation and the Dutch disease – a situation when a sudden flush of petrodollars has led to a decline in manufacturing and agriculture.

The worst situation in case was former president Mahmoud Ahmadinejad’s tenure when an oil windfall of about $800 billion left Iran saddled with an inflation rate of over 40% and a tattered economy.

With lower oil prices and revenues, meanwhile, the government has had to struggle for funding development projects and paying its huge army of employees in a country where much of industries and businesses is state-owned.

In recent months, a growing supply glut has sent oil prices into a tailspin, with Iranian crudes currently averaging in the $20-30 range.

On Sunday, local media said the government of President Hassan Rouhani had drafted the budget for the new fiscal year on the basis of $35 a barrel. Government officials say they have cut the country’s dependence on oil to a third of what it used to be to around 31.5%.

Deputy Industry, Mine and Trade Minister Mojtaba Khosrotaj said Iran’s oil revenues in the new year are estimated to total $14 billion if the government’s bid to increase exports by 500,000 barrels per day realizes.

That is a huge climb-down from record annual revenues of $100 billion which came during some of Ahmadinejad’s years in office.

Hopes set on mining  

The mining sector is being groomed as Iran’s favorite to move away from the oil-based economy.

As part of the 2025 Outlook initiative, Iran plans to expand domestic value-adding activities by focusing on downstream projects to enhance sustainable development.

Last month, Khosrotaj said Iran has potential to generate more revenue from mining than it does from crude.

Another official said Iran possesses 7% of the world’s total mineral reserves worth about $700 billion, which could rise to $1.4 trillion with new discoveries – a figure which roughly equals Iran’s total oil revenues so far.

The country is ranked the world’s 15th with more than 27 billion tonnes of explored reserves and 57 billion tonnes of potential reserves.

According to head of Iranian Mines and Mining Industries Development and Renovation (IMIDRO) Mehdi Karbasian, Iran plans to attract over $20 billion of foreign investment in mining and downstream industries.

US growth partnership company Frost & Sullivan said in a report released on Friday that Iran’s mining industry value chain requires new investments of approximately $60 billion.

Currently, the mining sector accounts for less than 1% of Iran’s total GDP and relevant downstream industries do not exceed 5%. The target is to increase this share to more than 2% and 20% respectively within the next ten years.

“The boom in the mining sector will help the Iranian Government reduce the unemployment rate and raise non-oil revenues significantly,” said Ali Mirmohammad, senior consultant and business development manager – Iran, Frost & Sullivan.

press tv

10 Comments on "Iran moving away from ‘oil curse’"

  1. makati1 on Mon, 28th Dec 2015 8:54 am 

    The US corporations are drooling over the resources there, but past history is going to open the door to Russia and China before the Us gets a chance. Both are already there and moving ahead with trade and it will exclude the USD.

  2. joe on Mon, 28th Dec 2015 9:51 am 

    What’s the alternative. Pakistan has nukes, and are friends with Irans enemy, the Taliban. If the US continues to pressure them, then what happens if they get a leader who simply doesn’t want to wait and develops nukes in months and turns Iran into an Islamic north Korea? War? Sure, Ok. That’s really working isn’t it? Imagine a real war, not a war like Iran/Iraq, but a sectarian one, with nukes? That’s the price of not trying peace.

  3. shortonoil on Mon, 28th Dec 2015 10:06 am 

    “The mining sector is being groomed as Iran’s favorite to move away from the oil-based economy.”

    Commodities from iron ore, to zinc, to copper are hitting all time lows. Sure, moving to a commodities based economy should work quit well? It should work quit well IF they don’t try to sell them at a profit. Rio Tinto can give them some pointers on how to do that!

  4. makati1 on Mon, 28th Dec 2015 6:52 pm 

    short, just having them means they can be more independent. Selling them at a profit depends on the cost of recovery, correct? Perhaps they don’t have to move mountains to do so? They may still be cost competitive with established companies like Rio, even at today’s prices. Perhaps with cheap labor and energy, they will succeed. We shall see.

  5. shortonoil on Mon, 28th Dec 2015 7:23 pm 

    “Perhaps with cheap labor and energy, they will succeed. We shall see.”

    If the world’s producers crash as fast as we think they will, Iran does not have much time to build the infrastructure that is needed, or the market. There is likely to be a very limited market for Yellow Cake in five years.

  6. makati1 on Mon, 28th Dec 2015 7:26 pm 

    Possibly. Or not. It is all a guessing game as there are not precedents to suggest our future. Exciting, isn’t it?

  7. BC on Tue, 29th Dec 2015 5:20 pm 

    I would suggest that we should anticipate the largest cross-sector, mass consolidation of global capacity that the world has ever known (or imagined), including untold mass firings; spinning off of assets; eliminating lines of business; debt defaults/restructuring; and large, cash-rich firms going private on a scale heretofore unimagined, all of which will be encouraged by the imperial corporate-state, i.e., think “Elysium”.

  8. Apneaman on Tue, 29th Dec 2015 5:50 pm 

    “Elysium” is going to need to be off planet like in the movie, because it won’t be standing very long on earth. The shit kicking in South Carolina in Oct, was 600 miles away from the eye of the storm. Storms that are only getting more fierce and frequent. Been at least a dozen more shit kickers across the planet since then. We can only rebuild the infrastructure so many times.

    SC floods’ damage: $12 billion, economists say

  9. JuanP on Thu, 31st Dec 2015 6:07 am 

    Russia To build oil rigs for Iran,

  10. Davy on Thu, 31st Dec 2015 6:28 am 

    The storm coined Goliath by MSM has moved up east of northern Greenland creating an interesting unprecedented winter time temp contrast. The Arctic near the pole is around 33 and south Texas is 29 today. Deniers explain that one.

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