Iran's Triple-Dependency on Global Markets

West-imposed sanctions appear to have undermined Iran's ability to attract foreign investors to its oil industry. However, it is unclear how these sanctions would affect Iran's nuclear aspirations.

The National Iranian Oil Refining and Distribution Company organized this Saturday a two-day forum aimed at attracting domestic and foreign investments. Foreign participants in the forum included companies from North Africa, Europe, Asia and the United States.

Iran's push to attract international oil companies to invest in the country is also manifested in the improvements it has offered in contract-terms of oil field developers.

According to Reut's analysis, Iran is dependent upon other nations for its economic development and stability in three aspects:

  • Importing consumer goods: Iran is dependent on foreign exporters for imports of machinery and other high-quality essential consumer goods and services .Iran utilizes foreign exchange earnings from oil exports to pay for such imports. Its main origins of imports are France, Italy, Germany, China and the UAE.

  • Exporting raw materials: With reserves equal to about 10% of the world's total, Iran is highly dependent on other nations to buy its supply of unrefined oil. Oil revenues account for about 80% of Iran's total earnings and almost 50% of the government budget.

    Iran's main destinations of exports are South Korea, South Africa, Italy, China and Japan. While it exports mainly oil and gas, other exports include fresh and dry fruits (pistachios), metals, and petrochemicals.

  • Attracting foreign investments: Iran's oil extraction capacity is inhibited due to out-of-date practices and equipment. However, it lacks the skills, knowledge and infrastructure required to update these abilities. Hence, Iran now depends on foreign developers and investors to efficiently exploit its natural resources.

Iran's latest efforts to attract foreign investors indicate that UN sanctions and US limitations on trade with Iran have successfully stalled investments.

Iran's inability to attract foreign investors to its oil industry will likely damage the production and export of its natural resources, as well as its ability to import high value-added products. However, it is unclear how its economic situation would affect its nuclear aspirations.

Sources

Islamic Republic News Agency, 02/17/07; full article.

MEHRNEWS.com, 02/17/07; full article.

Xinhua, 02/17/07; full article.

Economist.com, 02/06/07, full article.

Jad Mouawad , New York Times, 02/13/07, full article