The Revolutionary Economy
- Iran has a strong foundation for rapid growth and development, with the world’s second largest petroleum reserves, a young, well-educated population and a well-developed industrial and commercial infrastructure.
- But revolution, war, mismanagement and factional feuds over economic policy have undercut potential since the Islamic Republic’s birth in 1979.
- The economy has been a central factor in shaping Iran’s political evolution. Since the revolution, it has also been the primary target of U.S. sanctions and other international measures trying to influence Iranian policy.
- Infrastructure development
- Privatization of state enterprises
- Foreign exchange liberalization
- Establishment of free-trade zones
- And elimination of subsidies and price controls.
- Unifying the exchange rate
- Establishing an Oil Stabilization Fund as a cushion against market volatility
- Authorizing the first post-revolutionary private banks
- Pushing through some improvements to the framework for foreign investment
- Stewarding the economy through a tumultuous period of unprecedented low oil revenues
- And luring new interest and investment from the West.
- Expanding credit and spending in a freewheeling fashion
- Feuding openly with a series of cabinet ministers and Central Bank chiefs
- Dismantling the planning bureaucracy
- Disempowering government technocrats
- And reveling in the reverberations of the global economic meltdown.
- The key uncertainty affecting Iran’s economic future is the leadership’s capacity to circumvent and mitigate sanctions, particularly restricting its banking relationships with Europe.
- Declining production from aging oil fields, together with political and logistical constraints on Iran’s ability to monetize its gas resources, will begin to take a steeper toll on Iran’s revenues and hard currency reserves.
- The government might be able to lure back some foreign investors by offering more attractive contracts. But changing the current ‘buy-back’ system would likely entail a bruising internal battle.
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