Government revenues projected from the export of crude oil in the last Iranian year (ended March 21) fell short of the actual proceeds by $21 billion, a report by Khabar Online reported.
As global oil prices are mostly of the descending order since the summer of last year, there is mounting concern over Iran’s oil export earnings as projections indicate a meaningful shortfall in the annual national budget. For decades the budgeting process has largely been the function of oil revenues, but now that seems to be changing, however at a slower pace than would have been desired.
Recent statistics referred to by senior officials validates such considerations. Last year’s budget envisaged $51 billion in oil revenues. However, only 960 trillion rials ($30 billion) was realized, Alireza Saleh, deputy for parliamentary affairs at the newly restored Management and Planning Organization, said last week.
Iran had assumed an oil price of $100 per barrel in last year’s (ended March 20) budget, as global prices (at the time when the budget was prepared) had been relatively stable for nearly four years, averaging $110 per barrel. However, prices have fallen by a whopping 60 percent since last June, hitting near six-year lows as growing production and tepid global demand caused a supply glut. Iranian crude averaged $80 per barrel in 2014 and today it is several notches shy.
While oil revenues in the Iranian year (March 2011-12) reached $180 billion, last year’s oil receipts barely reached $30 billion. A simple comparison between the two figures reveals an 83 percent, or six-fold, decrease in annual oil earnings, a development unheard of in recent memory.
The National Iranian Oil Company is entitled to 14.5 percent of revenues from the sale of oil and gas condensates. “Allocations fell four-fold due to the systemic plunge in the international price of oil,” NIOC managing director, Rokneddin Javadi was quoted as saying last month. Although government budgetary needs were largely met through oil exports in previous years, the unprecedented decline in fossil fuel earnings has compelled the government to rewrite old and unsustainable policies in managing the affairs of 80 million Iranians. Senior officials have taken turns to proclaim that as the going gets tough there is an urgent need for tightening the belts and “living within our means.” From what is known, the Rouhani administration is now focussing on tax revenues to help plug the increasingly yawning gaps in national income and expenditures.
In this year’s budget average crude prices have been put at $50 a barrel. President Hassan Rouhani warned in April that Iran’s budget will see the “lowest reliance on oil-revenues” in the current year that started on March 21. Over and above the huge fluctuations in the global price of oil, plummeting oil revenues are attributed also to the western and international sanctions imposed on Iran over a dispute over its nuclear energy program. The sanctions provide for a cap of one million barrels a day of crude oil export, which has been restricted to Tehran’s traditional customers. The European Union, under pressure from Washington, enforced its own embargo on Iranian oil in 2012. As a consequence, oil exports have been cut by more than half to nearly 1.1 million barrels per day from a pre-sanctions level of 2.5mbpd.
Iran and six world powers (Britain, China, France, Russia, the US plus Germany) are trying to meet a self-imposed deadline of June 30 to reach a final nuclear agreement that would result in lifting the sanctions and also freeing almost $110 billion in Iranian assets blocked overseas because of the oil, economic and banking sanctions.
