Home News Economy Annual Iranian Budget Diminished but still Shows Strong Prospects

Annual Iranian Budget Diminished but still Shows Strong Prospects

The previous budget was set with the expectation of a significant influx of capital, including that which was provided by Western governments in the form of sanctions relief, as an incentive for remaining engaged in the nuclear negotiations that concluded last July. That deal is now expected to pour tens of billions of additional dollars into the Iranian economy once it is implemented, as is currently expected to happen sometime in January.

The latest budget projections indicate that the effects of that forthcoming windfall have been somewhat mitigated by the fact that Iran’s rivals in OPEC have proven unwilling to cut oil output in order to force prices to recover. For its part, Tehran has promised to sell oil in the highest possible quantities, increasing its exports by 500,000 barrels per day in the first several months of 2016, even if it does so at unusually deflated prices.

But the current expectation of diminished spending does not change the fact that the Islamic Republic is expected to make a significant recovery relative to the sanctions era. In fact, it may indicate that Tehran had already earmarked large sums of money for development projects and for the country’s various paramilitary interventions, and is now experiencing a comparative shortfall.

But the regime’s public statements still boast of other large-scale development projects that are supposedly in the works for the coming year. Indeed, Trade Arabia indicates that the forthcoming budget has already allocated six billion dollars for petrochemical and refinery projects. But these funds will reportedly be drawn not only from the country’s existing revenue streams and early expansions in the oil economy, but also from foreign investment.

Since the conclusion of the nuclear agreement in July, there has been a remarkable surge in economic interest from countries formerly involved in the enforcement of sanctions. The significance of that potential source of investment capital is made clearer by the apparent fact that circumstances in the Middle East region are diminishing the prospects that Iran has for obtaining the desired capital on its own.

However, the surge of European interest in the Iranian market is also a global phenomenon, and many countries are promising to enrich the Islamic Republic as a result of their fierce competition among themselves to be the first to gain entry to that market. The traditional political relations between Iran and those countries do not appear to be of much significance, as long as they have been trading partners in the past.

Thus, India and China are competing on a relatively level playing field, with their mutual interest pushing each country to offer major incentive to Tehran, which may yet increase the size of the forthcoming budget. Indian Express reported on Tuesday that the Indian government is working to rush a 150 billion dollar line of credit to Tehran. This is in turn aimed at speeding the joint development of the Chabahar port, before China can interfere amidst that nation’s ongoing efforts to expand economic, political, and military cooperation with the Islamic Republic.

China is one aspect of the longstanding concern that exists among Western analysts regarding the possible development of an anti-Western alliance chiefly comprised of China, Iran, and Russia. Certainly, Russia also is pushing for broad-based cooperation with Iran in the post-sanctions landscape. A spokesperson for Russian business interests said on Tuesday, “Iran and Russia have a long history, and we are trusted partners for each other,” according to Agence-France Presse.

The individual was speaking in the context of reports that Russia is planning to start work on the construction of two new nuclear reactors inside Iran in the coming week. This longstanding project stands to diversify the Iranian energy economy, assuming compliance with the nuclear agreement. But the avowedly economic cooperation could also serve as another springboard for nuclear weapons development, especially in the midst of a restored Iranian economy.