As long as oil revenues are squandered on current expenditures and officials have no plans to invest them in scientific and petrochemical sectors, the abundance of oil and gas resource becomes a curse instead of a blessing, and gives rise to “Dutch disease”, a member of Energy Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture said.
"We must understand that oil and gas are not a means of generating income. These resources are national wealth and belong to future generations," ILNA also quoted Ali Shams Ardakani as saying.
There should be no worries about sanctions and absence of oil money provided that the income is spent on developing infrastructures, he added.
The first time Iran fell under the charm of oil revenues, or was technically afflicted by the so-called Dutch disease, was in the early 1960s.
Dutch disease describes a paradox that occurs when good news, such as the discovery of large oil reserves or a large injection of foreign capital, harms a country's broader economy.
Symptoms of the Dutch disease reemerged in Iran’s economy in 1984-85 when oil exports jumped to $50 billion. Yet again, between 2002 and 2012, the country fell for oil revenues hook, line and sinker. And the last time windfall gains of natural resources misled an Iranian government was after the Joint Comprehensive Plan of Action, the nuclear deal Iran signed with world powers in 2015.
When a country catches the disease, petrodollars wreak havoc on all political and social structures of the country. Economically, a massive inflation hits the country, creating an inequality substantial enough to lead to a national breakdown.
“No matter how much revenue is generated by selling oil, as long as the money is not spent to generate jobs and eradicate poverty, not having the income is more of a blessing,” he said.
As per the 1950 legislation that led to the nationalization of the Iranian oil industry, oil revenues were not expected to cover budget deficit. However, it is regrettable that the country has continued to repeat the same mistake for the past seven decades.
Drawing an analogy between Iran and Turkey, the ICCIMA official said daily energy consumption in the former is almost equal to the energy produced by burning 5 million barrels of crude oil, while the latter's total liquid fuel consumption averaged 860,000 barrels per day in 2015.
Turkish subscribers are charged 25 cents as tax for each liter of fuel.
In the past four years, the price of gasoline has not changed whereas tariffs for electricity and gas have risen on a regular annual basis.
"The revenue will be wasted unless it is reasonably spent on expanding manufacturing industries that will not only generate income, but also help create jobs," he said.
Highlighting previous painful experiences, Ardakani said that the former government headed by president, Mahmoud Ahmadinejad, sold $800 billion of crude that was $63.5 billion more than the revenues earned by the country in the previous century, “almost all of which was squandered”.
"Promoting the notion that oil revenues are meant to go into people's pockets is exploiting their ignorance and gullibility. These incomes are assets that should lead to boosting investments," Ardakani said.
Iran launched the Subsidy Reform Plan under the tenure of Ahmadinejad in 2010. The plan cut subsidies on food and energy, and replaced it with monthly cash payments of 455,000 rials (currently worth around $2) per person.
According to reports, around 60 million people are currently receiving the monthly cash subsidy that cannot even purchase half a kilo of red meat.
