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Iran

Beyond oil score(out of 100 points) 43.5
Index ranking(out of 26 countries ranked) 15
Overall status*  
General Economic Framework  
Political Framework  
Society and Future Skills  
(Beyond) oil related factors  


Iran has the world’s third largest oil reserves and the second biggest gas reserves. Iran is OPEC’s second biggest oil producer. The Iranian economy is very oil dependent. 80% of export receipts, and 25% of Iran’s GDP are provided by oil exports. Iran is continuing to develop its oil resources, through development of new fields.

Beyond-oil investments to drive future growth

The Iranian government under President Khatami set up the oil stablization fund. Under this scheme, any earnings collected above $22 for the sale of each barrel of oil is saved in this fund, as means of financing the economy at times when oil prices fall. Iran is also developing its gas sector through the construction of pipelines to neighbouring countries. Other non oil sectors of the economy which are being developed are construction, tourism and agriculture. Car manufacturing is a major non oil industry in Iran. Iran is the Middle East’s biggest car producer. Furthermore, Iran Khodro, which is Iran’s biggest car maker, has opened up production lines in Belarus and Syria. There are also plans for the establishment of a auto assembly line in Senegal. Iran exports its locally produced cars to foreign markets such as Russia and Afghanistan. Shipping is another growing sector in Iran’s manufacturing sector, plus Information Technology (IT). Iranian university students have won several international competitions in Robotronics.

According to the Iranian government Iran is trying to develop its nuclear energy capabilities, as means of developing non oil sources for production of energy.

There are obstacles in the path of the Iranian economy. Iran suffers from high inflation (13%), high unemployment (15%), and high level of migration amongst its educated youth. International isolation has lead to a serious fall in levels of international investment. This was evident in 2005 when the Swiss Bank UBS ceased operating in Iran. Meanwhile continued US embargo is preventing the sale of much needed technology for the Iranian industry. Corruption is a severe obstacle in economic growth. Between 2004 and 2005 Iran’s ranking in the corruption perception index dropped by five points to the 93rd position, thus positioning Iran against some of the most corrupt countries of the Middle East region.

Beyond Oil Summary

Despite efforts by the previous Khatami administration to kick start the oil sector, and to reduce Iran’s dependency on oil, Iran’s new administration under Mahmoud Ahmadinejad has reversed this trend by increasing the reliance of the Iranian economy on oil. This was most evident in Ahmadinejad’s 1st budget, which was approved for the Persian year 1385 – 1386 (2006-2007). In this budget, oil income is estimated at above $22 dollars, which means that less will go into the stablization fund. Meanwhile the contribution of non oil sector to the GDP, and plans to develop them are still in preliminary stages. Development of the gas industry is being hampered by US embargo and Ahmadinejad’s intransigent stance, whilst far more money is leaving Iran, and flowing in as investment. The uncertainty surrounding Iran’s international stance, possible sanctions, high defence expenditure and very low investment in the non oil sector have contributed to Iran’s relatively low ranking in the Beyond Oil ranking.

  Indicates high preparedness   Indicates deficits but potential for development   Indicates unfavourable preconditions.
 
     
   
 
 
Beyond oil © 2007.