Iran’s history has shown that oil in the hands of despotic and anti-development rulers has turned into a curse. Oil revenue has led to corruption, the extravagance of rulers, military adventurism, and regional destabilization. An example of this is the Iranian regime’s adventurism in Lebanon and Iraq, with the most recent example being the October 7 attack.
The class gap among the people of Iran is widening daily, and the regime has no solution other than to continue on this path.
Experts say that squandering such underground resources and human capital requires a skill that only the Iranian regime seems to possess.
The state-run Jahan-e-Sanat wrote on January 24, 2024, “The Iranian economy is not in good condition in terms of decision-making structures and the costs of managing the economic environment of the country. Under such circumstances, it can be said with bitterness and dissatisfaction that Iran’s economy has lost its geoeconomic playing cards. Indeed, it takes a lot of skill for a country with this level of geographical capacities and natural and human resources to have practically no share in the global economy! Nevertheless, due to the country’s movement towards industrial, economic, human, and geopolitical erosion, there must be an immediate fundamental review of all economic governance procedures in the country.”
The Iranian regime, in addition to suppressing the Iranian people and exporting instability to the region, has caused the loss of exploitation of many unique geographical opportunities. According to a study on corridors passing through Iran, “Iran is continuously and serially being excluded from East-to-West land, rail, sea, and air transport corridor projects, and major energy transmission lines are being drawn along routes far from Iran’s borders with the presence of new players.”
This is while, due to a lack of necessary investment in oil resources, the Iranian regime will soon be forced to import oil and gas.
“Iran, due to severe imbalance in various sectors of its energy economy, has lost the ability to be present as a player in the fuel carriers market, not as a determining or medium power, but even as a small and ordinary player, and has transformed from a major exporter to an importer of gas, electricity, gasoline, and diesel,” Jahan-e-Sanat added.
Most economists acknowledge that due to the low rate of physical fixed capital formation in the last 12 years, depreciation has outpaced investment in the country, and the country is on the path of infrastructure erosion. On the other hand, the continuous decline of the clerical regime’s social capital has led not just to the migration of elite forces but to their escape from the country.
A January 23 report by the Ham-Mihan daily states, “Our country has faced a reduction in investment in the oil and gas sector for many years, and the urgent need of the country’s oil and gas industry to reach an acceptable condition (not even a desirable one) is approximately 200 billion dollars. Recent years’ experience clearly shows that attention to oil has been solely from the perspective of ‘financial returns,’ and this instrumental view has led to the neglect of long-term planning for the continued exploitation of Iran’s oil industry capabilities through investment in infrastructure activities.”
The issue of reduced investment in the country’s macroeconomy has reached a critical state.
“The vice president of the Tehran Chamber of Commerce stated that the most important issue in the country today is ‘investment,’ and said: In the 2010s, the investment rate in the country decreased to the point that in the final years of this decade and the early 2020s, the depreciation rate surpassed the investment rate” according to the ILNA news agency on June 12.
With the death of its former president Ebrahim Raisi, the regime is busy staging the election show and has no concern for the future of the Iranian people; otherwise, economists have been warning for years about what the super crisis of stagflation and the accumulation of imbalances in the macroeconomy will bring to the existence of Iran, especially if the global transition from fossil fuels, the pension fund crisis, energy imbalances, environmental issues and water tension, the exacerbation of the class gap, infrastructure decay, and financial constraints are taken into account.
Explaining the super crises and serious challenges of Iran’s economy, economist Vahid Shaqaqi Shahri told Etemad newspaper on June 11: “Since 2018, the growth of depreciation compensation costs has outpaced investment growth, which sends a warning signal to Iran’s economy, indicating that Iran’s economy has entered the phase of infrastructure erosion.”
Shaqaqi considers the financial resource constraints and the exacerbation of infrastructure decay in Iran’s economy due to lack of investment over recent decades as a massive crisis for Iran, which requires at least 500 billion dollars over the 2020s to compensate for.
