[A-List] Iran's Budget, Oil Prices, Privatization, Etc.

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

It looks like Iran's power elite, the President as well as the other
factions, are taking the Saudi design into account.  Ahmadinejad, or
the Islamist left in general, needs Michael Lebowitz's advice more
than Chavez does, but I doubt that either Beyond Capital or Build It
Now has been translated into Farsi or Arabic. -- Yoshie

<http://ipsnews.net/news.asp?idnews=36348>
ECONOMY-IRAN:
Shia-Sunni Split - Factor in Annual Budget
Kimia Sanati

TEHRAN, Jan 29 (IPS) - President Mahmoud Ahmadinejad has submitted to
Iranian parliament a budget bill for the fiscal year starting Mar. 21
that factors in the possibility of falling oil prices to "neutralise
the plots of the enemies" of Iran, already under United Nations
sanctions.

Oil prices have plummeted from 78 US dollars per barrel in July to 48
dollars currently and may drop further if the Organisation of
Petroleum Exporting Countries (OPEC) does not lower production. Basing
the budget on oil revenues of 33.7 dollars per barrel for the next
year is considered more realistic than last year's budget which
expected Iranian oil to sell at 36 dollars per barrel or more.

"One must bear in mind the new factor contributing to the regional and
Iranian economy and oil prices, namely, the Sunni-Shiite conflict.
There is now every reason to believe that the Saudis, whose economy
won't be seriously damaged by a drastic fall of oil prices, are
deliberately avoiding to help stop the plummeting of oil prices by
refusing to allow cuts in OPEC surplus production of 700,000 barrels
per day," a political analyst in Tehran who chose not to be named told
IPS.

"Iran's support of Shiite fundamentalists in Iraq is causing greater
concern among the Sunni Arab countries and the best way that Iran's
role and influence there can be diminished without resorting to
violence is making it economically impossible for Iran to sustain that
support, so Iranians have to tighten their belts now. The deflationary
budget for the next year, if strictly followed, can serve to reduce
the effects of further more depressing U.N. sanctions and falling oil
prices," he added.

Most domestic newspapers, even the reformist opposition's few
remaining mouthpieces, have viewed the budget bill, submitted last
week, favorably and 'Keyhan', a hard line newspaper and staunch
Ahmadinejad supporter, described it as ''bold''.

"The step taken by the government is a firm response to a new round of
Western plots against Iran that mainly aim to reduce investment in
Iranian oil and gas sectors and deprive Iran of its most important
source of revenues. Now one can say that the enemy has lost its last
lever to put pressure on Iran," a Keyhan editorial said.

In spite of last year's extravagant budget, the government has had to
ask parliament four times during the current fiscal year to supplement
the budget, from deposits accumulated in its Oil Reserve Fund from
selling oil at much higher prices. Five billion dollars of the reserve
have into importing subsidised gasoline alone.

"Even with oil selling above 60 dollars per barrel for several months,
the government has managed to drain all the reserves from ORF, and the
balance at the end of the present fiscal year (ending Mar.20) will be
nil if the government's insatiable need for money continues in the
same way. Government expenditure is expected to swallow even the last
drops of its estimated 56 billion dollar oil revenues in the current
year whereas 50 percent of the deposits of the ORF was meant to help
the private sector to develop and expand at the time of its
establishment," an economic observer in Tehran told IPS.

Critics say the government may try to increase expenditure in the
proposed, seemingly austere budget, if oil sells better than the
predicted 33.7 dollars per barrel, by sending budget supplement bills
to parliament and extracting money from the ORF to meet its needs.

"When giving its approval to the budget bill, the parliament must
prevent the government from making supplementary budget bills a
tradition. Now that the government has volunteered to reduce its
current expenditures, the parliament must also avoid letting
government expenditures rise by approving its budget supplements,"
Masoud Nili, economist, was quoted by the 'Sarmayeh' newspaper as
saying. If the government is free to ask for more and more money all
the time from the parliament, the budget plan will lose its function,
he said.

The Iranian budget has to be planned in accordance with the country's
'20-year Vision' -- a plan outlined by the Supreme Leader Ayatollah
Khamenei to make Iran an economically developed country by 2021 -- as
well as the country's fourth 'Five-Year Development Plan' of which the
country is now in the second year. Both of them require the government
to minimise its role in economy.

Nearly a year after Khamenei directed implementation of provisions in
the Iranian constitution to privatise and reduce the role of the
government, the Ahmadinejad administration maintains an overwhelming
presence in the economy and continues to weaken the private sector --
a policy that is reflected in the budget bill.

If the government fails to carry out privatisation as envisaged in the
next fiscal year a huge budget deficit will result, but there are yet
no signs of surrendering control over public sector companies.

"It's now golden days for the Iranian steel industry. (But while) the
government is required to sell a part of Mobarakeh Steel Factory, it
is planning to build an 800,000 ton steel mill itself. The government
could have prepared the conditions to develop the industry by the
private sector instead,'' a former industries minister, Eshagh
Jahangiri, was quoted by the Sarmayeh newspaper as saying.

Government interference in economy is felt in other areas, too. Last
year the government increased minimum wages which led to an increase
in the prices of products. At the same time, the government banned any
increase in prices of dairy products, incurring huge losses on dairy
factories.

"When Ahmadinejad administration and the parliament were warned last
year of inflicting the already ailing economy with the Dutch Disease,
they just snubbed everyone, and parliament approved one of the most
extravagant and expansionary budget bills in post revolutionary years
for fear of losing popular support,'' the economic observer said.

Ahmadinejad denies inflation has risen, just as he says he is not
worried about the U.N. sanctions. The inflation rate announced by the
Central Bank of Iran for the past nine months stands at 11.9 percent.
Critics say the government keeps the figure down by not including
prices of certain items such as real estate and rent in the 300 item
basket on which calculation of inflation rate is based.

Lower oil prices, U.N. sanctions, U.S. threats, government control and
the ever-rising inflation are not the only woes of the Iranian
economy. Constant accusations levelled against private investors by
the President himself have resulted in a sharp decrease in investment.
This is also denied by the government.

Scaring away investors has caused the criticism of Ayatollah
Shahroudi, the conservative Chief Judiciary, who defends improvement
in conditions to encourage private investment by creating a safer
economic environment. Nobody should be called "economically corrupt"
unless the corruption is proved in court, the Ayatollah says.

Further U.N. sanctions, if Iran does not suspend its uranium
enrichment programme within a few weeks, can hit banks very hard. Two
of the major Iranian government-owned banks, Saderat and Sepah, have
recently been boycotted by the U.S. treasury with many European banks
following suit. The flow of cash in and out of the country is harder
than before and many transfers are done through indirect and more
costly channels.

"The boycott can be seen as part of a new U.S. policy to take
advantage of Iran's economic troublesà the new policy is a much less
costly procedure for the Americans and when coupled with diplomatic
pressure from the international community, it can bring Iran down to
its knees much more effectively than a military attack," the analyst
said. (END/2007)

<http://www.mmorning.com/ArticleC.asp?Article=4397&CategoryID=6>
Iran: Ahmadinejad seeks spending rise in new budget

President Ahmadinejad, who has come under fire from both conservatives
and reformists over his Administration's inability to control
inflation

President Mahmoud Ahmadinejad last week unveiled his second annual
budget, forecasting a sharp 20-percent increase in spending but lower
oil revenues for OPEC's second largest exporter.

He asked Parliament to approve a budget of 2,290 trillion rials (about
248 billion dollars) for the next Iranian year starting on March 21, a
19.6 percent rise on current expenditure.
It was based on projections that Iranian oil will sell for 33.7
dollars a barrel, compared to 40 dollars in the current year's budget.

Ahmadinejad has come under sharp domestic criticism over his
government's increasing dependence on petrodollars and its inability
to control inflation, which is officially at 12 percent but which
economists believe is at least 20 percent.

"The future is not predictable. It is possible that our enemies want
to reduce oil prices to hurt us; that is why we have set the price at
33.7 dollars per barrel to show we are ready for anything",
Ahmadinejad told the legislature.

"Even if they reduce oil prices, we'll be ready to handle it".

Crude prices have fallen from 68 dollars to about 50 dollars per
barrel in the past six months. Iranian oil usually sells for about 10
dollars less.
--
Yoshie
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