Faith-based frenzy that unites Iran with the oil speculators

Iran’s government is becoming isolated in the diplomatic world and is losing access to international banks but it still has a few allies who share a fanatic, faith-based approach to this world’s problems: oil speculators.

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So Iran is long crude and short refined product. Just like the speculators, it needs a high and rising oil price. Without $70+ oil, Iran would face fiscal disaster. In the Iranian fiscal year just ended, government expenditure rose by 25 per cent, or 27 per cent above what was budgeted. Only high oil receipts kept government finances from collapsing. Most of the increased spending went to operating expenses such as salaries and price subsidies, rather than capital expenditure. That will be hard to cut. The report of an IMF mission to Iran from last December said a “fiscal adjustment”, or government spending cut, of 3 per cent of gross domestic product would be needed, along with tightened monetary policy.

Financial Times