Azerbaijan, Baku, Feb. 6/ Trend M. Moezzi
The former managing director of Iran's oil ministry warned the government not to count on high oil prices in the coming year's budget, saying it would lead to even tougher economic conditions, Mehr News Agency reported.
In the budget it submitted to the Majlis (parliament), the executive branch cited the future price of $85 per barrel of oil as the basis of its calculations. This doesn't take into account the income lost from the sale of 500 to 600 thousand barrels of oil a day to Europe, said Seyed Mehdi Hosseini.
The European Union (EU) will stop buying Iran's oil on July 1 as part of the international drive to impose sanctions against it because of its nuclear programme. Iran insists the programme is for domestic use, while the United States and its allies disagree.
Not only is there is no mention of Iran's current deficit in the government's proposed budget, there is an increase in spending. If Iran is counting on shocking the world's oil markets and driving up prices and its income by cutting off its oil exports to Europe overnight, then the gamble won't pay off. It will be a costly mistake. Neither Iraq's war against Kuwait or higher tension in the Persian Gulf have succeeded in keeping oil prices high over the long-term, said Mr. Hosseini.
Although the principles behind Article 44 of the Iranian Constitution mandating the privatisation of industries are solid, carrying them out should be done with care, the former oil official added.
Simply selling off underperforming units without any government support is sure to cut production and jobs in the country. The increase in the government's proposed budget is a sign of higher expenses that in turn will result in higher inflation and lower value for the rial, said Mr. Hosseini.