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Iran
PETROLEUM INDUSTRY
Following the quadrupling of oil prices in the last quarter of
1973, prices remained relatively stable from 1975 to 1978. During
this period, Mohammad Reza Shah encouraged a high level of oil
production and increased spending on imported goods and services
and on military and economic aid to a small number of Iran's allies.
Khomeini's government shifted the emphasis by decreeing a policy
of oil conservation, with production reduced to a level sufficient
to do no more than meet foreign exchange needs.
The efforts, initiated by the shah, to develop the petrochemical
industry were thwarted by the Iran-Iraq War. The shah had begun
a large petrochemical plant at Bandar Shahpur (now Bandar-e Khomeini)
to produce fertilizers and sulfur; the plan was to expand production
to include aromatics and olefins in a joint venture with Mitsui,
a Japanese consortium. The plant, which cost US$3 billion, had
almost been completed at the time of the Revolution. Iraqi planes
bombed the still- unfinished plant in late 1986. Other petrochemical
plants were completed soon after 1979, including the Khemco sulfur
plant on Khark Island and a fertilizer plant at Marv Dasht near
Shiraz.
The global recession of the early 1980s depressed the demand
for oil. Iranian exports were also affected by the increased production
by countries that were not members of the Organization of Petroleum
Exporting Countries (OPEC--see Glossary). The resulting glut on
the market caused a decline in Iranian oil revenues, which in
turn lowered the value of the Iranian GNP. From September to October
1980, output fell from 1.3 million bpd to 450,000 bpd. Iran's
petroleum production increased, however, to 2.4 million bpd in
both 1982 and 1983, which enabled the government to end domestic
rationing (see table 5, Appendix). However, production fell again
in 1986 to 1.9 million bpd. OPEC prices for crude oil meanwhile
fell from US$34 per barrel in 1982 to US$29 in March 1983. The
government reduced oil exports in the early 1980s to promote a
higher price per barrel and to foster conservation. Oil production
fell as planned, although not as low as during 1980-81. By 1987
oil and gas exports produced only enough revenue to meet basic
needs.
Oil revenues financed the import of weapons, food, medicine,
and other critical goods and services by the mid-1980s. Whether
or not the oil sector would be able to sustain losses as Iraq
continued to target Iranian oil production and transportation
facilities remained to be seen in late 1987. In addition to bombings
of Iranian shuttle tankers, the Iranian oil industry was also
troubled by fluctuating prices. Oil revenues decreased in 1985
and early 1986, remained steady in late 1986, and rose gradually
in 1987. The government attempted to compensate for lost revenues
in 1987 by further reductions in nonmilitary programs.
Data as of December 1987
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