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.
- Reintegrating Iran into the global economic system
- Improving fiscal and monetary discipline to reduce inflation
- Enabling economic recovery without strict austerity measures
- Enhancing domestic capabilities and reducing dependence on oil revenues
- The key uncertainty affecting Iran’s economic future is the leadership’s capacity to translate sanctions relief into jobs and economic opportunities.
- The government also needs to seek foreign investment to address declining production from its aging oil fields and logistical constraints on monetizing Iran’s gas resources.
- The government might be able to lure back some foreign investors by offering more attractive contracts. In 2015, the government introduced the Iran Petroleum Contract, with more favorable terms for investors than the ‘buy-back’ system.
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