Iran needs $400 billion in investment to survive, economist says
Iran needs $400 billion in investment if it is to save itself and its exhausted, oil-dependent economy in the next few years, an economist in Tehran has said.
Over the past 50 years, Iran has sold $2 trillion worth of oil with little economic growth, Vahid Shaghaghi Shahri, professor of economics at Iran’s Kharazmi University told the Khabar Online websiteon Sunday.
When asked if negotiations to revive Iran’s 2015 nuclear deal are successful in Vienna and if US sanctions are lifted it will save the economy, Shahri replied that Iran faces many restrictions and obstacles. international organizations, but what is just as important is the quality of its internal governance.
Shahri also mentioned the multiple crises in the history of the Islamic Republic as a factor preventing a decent rate of economic growth. But in fact, with the exception of the early years of the Iran-Iraq war in the early 1980s, every crisis was a choice made by the regime’s leaders.
Shahri, living in Iran, could not openly make such a comment, but in fact the decision to create and maintain a state-controlled economy hostile to foreign investment, the lack of social and political freedoms, the unfair advantage for regime insiders, especially the Guard Revolutionaries are some of the self-inflicted wounds.
Vahid Shaghaghi Shahri, Professor of Economics at Iran’s Kharazmi University
Shahri in the interview referred to two rounds of international and US sanctions in the 2010s and said it was a “lost decade”. From 2010 to 2020, the average rate of economic growth was zero, he said and added: “What is important is that after a decade of economic crisis, Iran must take special measures to save the economy from exhaustion and decline”.
The country needs $400 billion in investment over the current decade, Shahri explained, $130 billion just to maintain its fossil fuel production.
The amount needed to revitalize the Iranian oil and natural gas sector mentioned by Shahri is indeed less than what the oil minister Javad Owji mentioned in November. He told a budget planning meeting that Iran had to invest $160 billion in its oil and gas sector or face a decline in production and possibly fuel imports.
Shahri also pointed out that for the first time in Iran’s modern history, infrastructure depreciation exceeded the rate of investments. Insisting that this is a serious crisis, he said that while oil prices recently peaked at $80 a barrel, Iran has failed to resolve the nuclear issue and to lift the sanctions, wasting precious time.
Shahri expressed concern that in the US congressional elections in November the Republicans will make gains and start “doing nasty things” against Iran, so it is best to strike a deal on the nuclear issue now. The Islamic Republic must also resolve the FATF issue, he urged.
The Financial Action Task Force or FATF, an intergovernmental watchdog, has blacklisted Iran for non-compliance with international conventions against money laundering and terrorist financing.
Shahri warned that even if Iran resolves its nuclear dispute with the West, ‘we will face three difficult years ahead’ as government coffers are empty and there is a crisis to pay pensions to millions of civil servants retirees. Moreover, the era of heavy global dependence on oil is coming to an end and Iran may face a situation of survival without its main source of income.