Thursday, December 07, 2006

Iran's cash cow drying up :: Business Week

Via Instapundit comes this story:
Iran's looming crisis is the result of years of neglect and underinvestment. As in other oil-producing countries such as Venezuela and Mexico, the government treats the oil industry as a cash cow, milking its revenues for social programs. It allocates only $3 billion a year for investment, less than a third of what's needed to get production growing again.

Compounding the pressure are policies that encourage profligate energy use. Gasoline prices are set at 35 cents a gallon, which has helped fuel 10%-plus annual growth in consumption, PFC Energy figures. The national thirst for gasoline far outstrips domestic refining capacity, so Iran will import about $5 billion in gasoline this year, or about 40% of its needs. The government is planning a $16 billion refinery building program to boost capacity by 60%. But unless Iran raises fuel prices, the new plants will just mean more consumption.

An oil squeeze could spell trouble for President Mahmoud Ahmadinejad. The populist leader has won backing at home through generous handouts. Ahmadinejad has ratcheted up public spending this year by 21%, to $213 billion, on everything from aid to rural areas to housing loans for newlyweds. He has also promised some $16 billion in outlays from a special $30 billion fund set up to tide Iranians through future hard times. Without a healthy oil sector, Iran's social spending could bust the national budget--and reignite inflation.
Business Week headlines its story "Surprise: Oil Woes in Iran." It's not a surprise.

Interesting that despite the generousity, Ahmadinejad isn't all that popular back home. More: student protests.

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1 Comments:

Anonymous Anonymous said...

So is it illegal to retain the employees passports in the UAE ?

A certain media company in the UAE just took everyones passport today. Pretty much a case of hand it over or lose your job.

Ahh the fun things these people get away with in sandland.

The labor law section on the ministry of labor website does not have one reference to the word "passport" on it. Go see for yourself

Then they wonder why the outsiders think that the middle east is backward.

Hopefully there are enough smart Emaratis around who will stand up and stop their compatriots from making their nation look bad.

5:21 PM  

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