Economy, Domestic Economy

Ways to Tackle Oil Revenue Loss

Ways to Tackle Oil Revenue LossWays to Tackle Oil Revenue Loss

Iran should generate alternative income sources to offset its oil revenue loss as the tumbling oil prices are draining billions of dollars from the government’s annual budget, Yahya Al-Es’haq, the head of Tehran’s chamber of commerce, industries, mines and agriculture said on Saturday.

“Alternatives sources of revenue have to be considered by the government to tackle the falling prices of oil at the international market,” he was quoted by ISNA as saying, adding that Iran should boost its non-oil exports as a means of tackling the oil revenue loss.

The price of oil has declined more than 56 percent from its peak of $114 per barrel in mid-June, and plunged further to less than $50 per barrel last week. Given that oil exports account for about 31.5% of Iran’s state revenues and more than 80% of total export earnings, any plunge in price of oil at the international market is expected to be followed by serious implications for Iranian economy.

Business leaders in Iran including Al-Es’haq argue that Iran has the capacities and resources which, if managed wisely, can help the country lessen its reliance on oil revenues – a shaky source of income which has proven to be highly susceptible to international policies and volatilities.

 Petrochemical Revenues

Al-Es’haq believes that Iran can generate massive revenues from petrochemical and associated industries which can substitute its traditional oil income.

“A large number of petrochemical projects which have been initiated in Asalouyeh (a city in Bushehr province of Iran) are expected to yield large profits in the coming year, provided that proper foundation is laid for exporting their products,” he said.

 Frozen Assets

Noting that Iran has “up to $100 billion in frozen assets blocked in countries such as Korea, India and Japan,” Al-Es’haq called for efforts to liquidate these government assets as a way to help Iran reduce its reliance on oil revenues.

Iran’s assets, generated mainly through oil sales, have been frozen by foreign banks since the West imposed sanctions on the country amid a dispute over Tehran’s nuclear energy program. Although the figure is contested, it is reported that China alone has frozen up to $22 billion of Iranian assets.

The Rouhani administration is struggling to get the money back home through diplomatic means. Once the assets are repatriated, state revenues will dramatically increase, resolving much of the economic malaise the country is grappling with.

 Raising Taxes

Tax hike is seen as another remedy that can help the government liberate the country’s economy from the oil revenue dominance.

However, as Al-Es’haq points out, “increasing taxes should follow a boost in the level of economic activities in the country so that people can generate more incomes and thereby pay more taxes.”