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Oil-rent Boom in Iran?

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  • Martin Beck

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    (GIGA Institute of Middle East Studies)

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    Abstract

    The present article aims to analyze the effects of high oil prices since 2003 on Iran. The theoretical basis of the analysis is the rentier state approach, the basic element of which is that rents are at the free disposal of the rentier. Empirically, the paper examines the issue areas of foreign policy, domestic policy and economic policy. After proving that the oil price—despite fluctuations—has constantly been at a high level in the first decade of the twenty-first century, the discussion demonstrates that Iran has used the increased rent in-come to support a populist policy. In terms of economic policy, the regime has pursued a redistributive strategy. The country’s foreign policy, particularly the ostentatiously pursued atomic program, has been very expensive since it provoked sanctions whose costs were initially balanced only by high rent income. Yet, in his first term, Ahmadinejad failed to prepare Iran for the situation that has occurred as a result of the global financial crisis: the redistributive policy of the regime has meant that an oil price below US$70 or US$75 now constitutes a severe challenge for the Iranian state budget.

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    File URL: http://repec.giga-hamburg.de/pdf/giga_09_wp111_beck.pdf
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    Bibliographic Info

    Paper provided by GIGA German Institute of Global and Area Studies in its series GIGA Working Paper Series with number 111.

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    Length: 28 pages
    Date of creation: Oct 2009
    Date of revision:
    Handle: RePEc:gig:wpaper:111

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    Keywords: Iran; oil; rentier-state approach; domestic policy; economic policy; foreign policy ;

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    1. Kohl, Wilfrid L., 2002. "OPEC behavior, 1998-2001," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(2), pages 209-233.
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