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Oil Export Revenue Forecasts Condemned as Unrealistic - International Law Office

International Law Office

Energy & Natural Resources - Iran

Oil Export Revenue Forecasts Condemned as Unrealistic

April 28 2003

A member of the Industries and Mines Committee of the Islamic Consultative Assembly has alleged that the oil export revenues forecasted in this year's Budget are unrealistic, and that the government's dependence on these revenues has caused state companies to become oil-dependent.

In an interview with the Young Correspondents Club, Ali Asghar Rahmani Khalili, the delegate from Behshahr and Neka cities, said that no thought had been given to including realistic revenue forecasts in the Budget. Therefore, the current trend of obtaining subsidies from all strata of society will continue into next year. State-run companies which have the lion's share of national income at their disposal are nonetheless absorbing over 68% of the total state budget; and while the operational costs incurred by the government are high, the revenues ultimately trickling into the Treasury are insignificant.

Rahmani stated that the budget for state-run companies for the year March 2003 to 2004 shows a 26% increase on the previous year, in spite of a policy of privatization and reduced state involvement. He maintained that oil export revenue forecasts are unrealistic, and that it would be more prudent to assume a figure of $19 dollars per barrel rather than the over-optimistic $23 dollars per barrel estimated in the Budget, which results in projected revenues of $23 billion. He added that the government's 80% dependence on oil revenues means that the operation of state companies will depend on oil exports. The government will thus need to make increasing cutbacks if it is to cope with the slow growth of tax revenues together with the need to maximize the use of financial resources in the oil sector, ever-increasing administrative costs and insignificant growth in revenue sources.

Rahmani added that efforts to implement the Foreign Investment Attraction and Protection Law are underway in order to enhance economic growth. To this end, the Budget Bill has provided for the utilization of foreign resources in the power sector and the oil and petrochemical industries, among others.

For further information on this topic please contact Behrooz Akhlaghi at International Law Office Dr Behrooz Akhlaghi and Associates by telephone (+98 21 873 21 38) or by fax (+98 21 873 41 29) or by email (bakhlaghi@kanoon.net).

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