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WEEKLY NEWSLETTER
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Iran
Index
Following the quadrupling of oil prices in the last quarter of
1973, prices remained relatively stable from 1975 to 1978. During
this period, Mohammad Reza Shah encouraged a high level of oil
production and increased spending on imported goods and services
and on military and economic aid to a small number of Iran's
allies. Khomeini's government shifted the emphasis by decreeing a
policy of oil conservation, with production reduced to a level
sufficient to do no more than meet foreign exchange needs.
The efforts, initiated by the shah, to develop the
petrochemical industry were thwarted by the Iran-Iraq War. The shah
had begun a large petrochemical plant at Bandar Shahpur (now
Bandar-e Khomeini) to produce fertilizers and sulfur; the plan was
to expand production to include aromatics and olefins in a joint
venture with Mitsui, a Japanese consortium. The plant, which cost
US$3 billion, had almost been completed at the time of the
Revolution. Iraqi planes bombed the still- unfinished plant in late
1986. Other petrochemical plants were completed soon after 1979,
including the Khemco sulfur plant on Khark Island and a fertilizer
plant at Marv Dasht near Shiraz.
The global recession of the early 1980s depressed the demand
for oil. Iranian exports were also affected by the increased
production by countries that were not members of the Organization
of Petroleum Exporting Countries
(OPEC--see Glossary). The
resulting glut on the market caused a decline in Iranian oil
revenues, which in turn lowered the value of the Iranian GNP. From
September to October 1980, output fell from 1.3 million bpd to
450,000 bpd. Iran's petroleum production increased, however, to 2.4
million bpd in both 1982 and 1983, which enabled the government to
end domestic rationing (see
table 5, Appendix). However, production
fell again in 1986 to 1.9 million bpd. OPEC prices for crude oil
meanwhile fell from US$34 per barrel in 1982 to US$29 in March
1983. The government reduced oil exports in the early 1980s to
promote a higher price per barrel and to foster conservation. Oil
production fell as planned, although not as low as during 1980-81.
By 1987 oil and gas exports produced only enough revenue to meet
basic needs.
Oil revenues financed the import of weapons, food, medicine,
and other critical goods and services by the mid-1980s. Whether or
not the oil sector would be able to sustain losses as Iraq
continued to target Iranian oil production and transportation
facilities remained to be seen in late 1987. In addition to
bombings of Iranian shuttle tankers, the Iranian oil industry was
also troubled by fluctuating prices. Oil revenues decreased in 1985
and early 1986, remained steady in late 1986, and rose gradually in
1987. The government attempted to compensate for lost revenues in
1987 by further reductions in nonmilitary programs.
Data as of December 1987
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