Iran today: The economy’s oil problem

After two days featuring the regime’s all-is-well propaganda on oil production and exports, we turn to the other side of the story this morning.

Arab Petroleum Investments (Apicorp) said on Friday that, amid declining exports and US-led sanctions, Iran needs an oil price of $144 per barrel to balance its Government budget this year.

The benchmark Brent crude price, used for more than half the world’s oil, has averaged about $108 this year.

A 25% shortfall would leave the Islamic Republic with a deficit of more than $70 billion on its 2013/14 Government budget, belatedly passed in May.

Back To The Oil Propaganda: Fars Praises Advances In Oil Industry

Despite dire predictions (see our opening introduction) of the effects of declining exports and increasing sanctions on Iran’s oil sales, Fars News — close to the Revolutionary Guards — is relentlessly upbeat on Saturday with four stories about Tehran’s plans to develop the country’s oil production.

Fars gushes about plans to develop the Hengam Oil Field and Qeshm Island:

Hengam Oil Field Output to Hit 45,000b/d

Iran Starts Development Plan to Increase Oil Production in Hengam

Iran Planning to Change Qeshm Island into Energy Hub

Fars does not mention how or to whom it plans to sell any extra oil it produces.

Fars also gives more — misleading — detail about a story it ran earlier this week about oil exports to India. Fars headlines:

Iran Proposes Sovereign Guarantee for Crude Oil Shipments to India

According to Fars, Iran has offered an Indian oil company, Essar Oil Ltd, the guarantee as a solution for the lack of insurance cover on oil shipments, a result of sanctions. The main problem with that, however, is that if something should happen to a shipment, Iran would have to reach into its foreign reserves to compensate the Indian company. What Fars also does not mention is that Essar is currently the only Indian company purchasing Iranian oil and that Essar is paying in rupees, which is limited in convertibility.

By Enduring America


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