Budget 98 Under the Shadow of US Sanctions and Falling Oil Prices

Mohammad Baqer Nobakht, head of the Planning and Budget Organization, announced on Wednesday, November 21, that "all relevant agencies have predicted an oil price of at least $70 per barrel for next year, but we have forecast a much lower figure for the budget." The Fars and Tasnim news agencies reported, citing sources, that the government has decided to set the budget based on a $65 oil price. In this year's budget law, Iran's exports of 2.41 million barrels of crude oil and gas condensates were predicted at an average price of $55, which was expected to yield a little over $48 billion for the country. Of this amount, 32% belongs to the National Development Fund and 14.5% to the Ministry of Oil, with the government's share from oil exports estimated at around $26 billion. ISNA reported on October 20 that the average selling price of oil in the first half of the year was $71, while the exchange rate increased from 3,850 tomans to 4,200 tomans, resulting in a total increase of 58% in public revenue from oil. However, the second half of this year coincided with US sanctions and a decline in Iran's oil exports. After the US withdrew from the JCPOA on May 8, oil and gas condensate exports from Iran decreased by about one million barrels until last month. On November 5, the US also enforced oil sanctions against Iran, and according to assessments, including those from the energy consulting firm Wood Mackenzie, it is expected that in the next six months (spring 98), the average oil and gas condensate exports from Iran will be around 1.25 million barrels per day. The current oil price is below $64, and if the current situation continues, Iran's expectations for projected revenues for the second half of the year will not be realized, although the significant growth in oil revenues in the first half of the year may not put the government in a budget deficit. However, Fars news agency reported on Wednesday that under the current conditions, there is a budget deficit of 30 to 40 trillion tomans in the 98 budget bill that needs to be compensated. The report, citing "some informed sources," added that Bijan Zanganeh, Iran's Minister of Oil, "has emphasized in meetings that he cannot commit to exporting more than one million barrels per day for next year." According to estimates from the US Energy Information Administration, the average price of Brent oil is expected to be slightly above $70 next year. Mr. Nobakht stated on Wednesday that "considering the characteristics of 98, we must prepare ourselves to pass through the sanctions period. In this regard, both the resources and expenditures of the country will face differences compared to previous years."