Interior Minister: Oil Budget No Longer Meets Provincial Needs

The Interior Minister of the Islamic Republic pointed to the $40 per barrel oil price and what he called the country's 'astronomical costs,' stating that the oil budget is no longer 'sufficient to meet the needs' of the provinces. On Friday, September 5, Abdulreza Rahmani Fazli made these remarks in a meeting with managers and officials from the western counties of Golestan province. In his speech, he called for 'fundamental changes' in the country's budgeting and administrative system but did not provide specific details on this matter. Rahmani Fazli stated, 'The oil budget at $35 and $40, with these astronomical and increasing costs, no longer meets the needs of the provinces.' He mentioned the 'misallocation' of some investments and expenses in the provinces without going into details and announced the government's intention to delegate economic policy powers to the provinces. The Interior Minister also called for an increase in exports and attracting foreign investment by economic actors in the provinces. Iran's economy is heavily dependent on oil exports and sales in global markets, with the price of this commodity being a key component of the country's public budget resources. Additionally, since these resources are received in dollars, their volume in the government's general budget is significantly affected by the exchange rate to rials. This comes at a time when some officials from the Ministry of Oil and members of parliament have stated that Iran is losing $8 to $10 billion monthly due to delays in implementing new oil contracts. The Iranian Oil Minister also pointed out the losses from delays in these contracts, stating that Iran has lost 'about $240 billion over the past years' in the South Pars field alone. The Iranian Ministry of Oil held a 'brainstorming session on the new model of Iranian oil contracts' in March 2014 with representatives from international companies, and later unveiled a new model of oil contracts in December 2015, proposing the development of 49 oil and gas fields for foreign companies. Since then, some conservatives and members of the ninth parliament, including Ahmad Tavakoli, Alireza Zakani, Elias Naderan, Hossein Najabat, Ahmad Amirabadi, and Mohammad Dehghan, have strongly opposed this contract model. The Tasnim news agency previously reported that an examination of the country's budget situation from 2005 to the end of 2015 shows that the highest rate of oil dependency occurred in 2006 and 2008, both during Mahmoud Ahmadinejad's presidency, when over 69% of the budget was funded by oil. With the intensification of international sanctions in 2011 against Iran's nuclear program, the share of oil in the budget dropped to about 50%. While the Interior Minister discusses the inadequacy of the oil-dependent budget to meet the financial needs of the provinces, Ali Larijani, the Speaker of the Islamic Consultative Assembly, had previously stated that the Islamic Republic is experiencing 'financial drought.' He first mentioned on October 30, 2012, that the Islamic Republic is facing 'economic drought' and that it 'has little maneuverability for the coming year.'