Iran Economic Overview


In the mid-nineties, that process of extraordinary expansion that started around the first half of the sixties, thanks above all to the very high revenues due to oil (of which the country was for a long time the second largest producer in the Middle East after Saudi Arabia), and destined to make Iran a real power, causing radical changes in its social order at least locally, it seemed to have run out and the 2000s saw a good economic recovery flanked, however, by a difficulty in planning and implementing the reforms necessary for progress of the country. It can be said that the great turning point of the Iranian economy began in 1951 with the nationalist policy attempted by Moṣaddeq, in particular with the nationalization of oil and the creation of the NIOC (National Iranian Oil Company). The shah Reẓā Pahlavī interpreted this renewal – albeit in a clearly capitalist key and aimed at favoring the emerging local bourgeoisie: towards 1960 he initiated what has been called the “white revolution” or “silent revolution”, that is a reform process aimed at relieving the depressed economic situation of the country through its accelerated industrialization. On the other hand, the problem of agricultural reform remained unsolved. In fact, the seizure of estates and the distribution of land to the peasants begun in 1963 did not in the least mean a greater participation of them in the conspicuous financial flows which, thanks to oil, now reached the country but immediately took other directions. In fact, there was no lack of various initiatives in favor of the development of cooperatives and in particular the establishment, in 1963, of the CORC (Central Organization for Rural Co-operatives of Iran), but only the few farmers who already had the best lands and who were able to give a productive approach to their business benefited from it. In practice, the already powerful class of former landowners, duly compensated, was transformed into the growing entrepreneurial force, which, in the context of accelerated industrialization and thanks to the decisive government support, became the backbone of the new Iran. Meanwhile, thousands of peasant families were forced to abandon the countryside, which did not ensure their livelihood, and emigrated to the cities, where industry was experiencing enormous developments (the increases in the sector were on average, until the fall of the Shah, of the order of 15% per annum) by not only private entrepreneurs but also by the State and various foreign companies. These found ideal operating conditions: proximity to energy sources, low labor costs, a rapidly expanding market and excellent fiscal conditions.

According to cheeroutdoor, the foreign presence, especially the US and the European Community area, was particularly intense in the steel, engineering and petrochemical sectors, with production destined not only for domestic consumption, but also for the neighboring Middle Eastern and Central Asian markets. Meanwhile the income per capita it increased enormously, especially in conjunction with the colossal increases in the international price of oil: it quadrupled from 1973 to 1976, going from less than 500 to almost 2000 dollars. In the face of an undoubtedly powerful productive dynamism and a, at least formal, takeover by the country of its hydrocarbon riches (in 1973 the nationalization of oil resources was completed through an agreement between the NIOC and the so-called “consortium”, grouping the numerous foreign companies operating in the sector, under which all exploration, extraction and refining activities came under Iranian control), serious distortions were accentuating in the socio-economic field due both to the different pace of development of the individual productive sectors and to regional imbalances and very heavy social inequalities. It has been estimated that at the end of the seventies only 10% of Iranians centralized the significant wealth of the country in their hands, while 90% lived in more or less desperate conditions. In particular, agriculture was placed in the global framework of the country as an immense pocket of backwardness and marginalization, while food self-sufficiency was far from being achieved.



The industrial landscape is now quite diversified; in addition to the petrochemical sector, the greatest developments were recorded in the steel, metallurgical, electronic, chemical (nitrogen fertilizers, caustic soda, sulfuric acid) and mechanical sectors and in the household appliances sector. Particularly dynamic is the automotive industry which, alongside assembly plants, produces various vehicles under foreign licenses; Tire factories are also expanding. Among the traditional industries, the textile ones stand out, to which the production of carpets is connected; the food industries are also being strengthened. Tobacco factories, tanneries, shoe factories and cement factories are also important. Industries are mainly concentrated in Tehran, followed by Eṣfahān, Tabrīz, Shīrāz, Rasht, Mashhad, Hamadān, Arāk, Bandar-e ‘Abbās, Ahvāz, Kermān. § Oil continues to be the country’s main resource. Under normal economic conditions, oil revenues make it possible to significantly stimulate the other productive sectors: on average for most of the 1970s the country had annually extracted over 250 million tonnes of oil. In 1979 the NIOC, which had practically become a powerful economic tool in the hands of the Shah, was placed under the direct control of the Ministry of Petroleum and the following year a new governmental body was established, the Continental Shelf Oil Company of the Islamic Republic of Iran, which grouped all the foreign companies operating in the oil fields of the waters of the Persian Gulf, a fact that has not failed to arouse obvious negative reactions from the companies concerned. But in the 1980s, due to the conflict with Iraq, production dropped significantly compared to the past. In addition to the important oil field near the island of Khārg and others on the continental shelf, most of the crude oil comes from the belt between Lower Mesopotamia and the northern coast of the Persian Gulf; other deposits are found in Zagros, near Shīrāz, and, to the north-west, near Kermānshāh. A dense network of oil pipelines connects the extraction sites with the refineries. Oil is often associated with natural gas; mining takes place mainly in the northeastern regions, off-shore. Iran is rich in many other minerals, for some of which it is among the major producers on a continental level, such as zinc, chromium, iron and lead; followed by importance are copper, sulfur, gypsum, iron, coal, antimony, manganese, magnesite, etc. The production of electricity is also of moderate importance, for the most part of thermal origin, naturally favored by the large availability of fuel.


Exports, which exceed imports, are still almost entirely made up of oil and petroleum products whose main buyers are Japan and the countries of the European Union, especially Italy. The other exports are represented by fresh and dried fruit, vegetables, iron and steel, carpets, aluminum etc. Imports, supplied in a very high percentage by the United Arab Emirates, the European Union and China, on the other hand, essentially concern machinery and means of transport, industrial products, especially chemicals, foodstuffs, etc. § The development of economic activities has required an adaptation of the communication routes, which remain centered on the main lines, and not uniformly distributed over the national territory. The railway network (totaling 7131 km in 2005) hinges on: Bandar-e Khomenī (formerly Bandar-e-Shāhpur), on the Persian Gulf, through the Zagros chain reaches Teheran, continuing then up to the Caspian Sea with a spectacular route through the Elburz; the line that leads from Tehran to Pakistan passing through Eṣfahān and Kermān (with a branch up to Bandare ‘Abbās); the two westward lines passing through Tabrīz and Hamadān and Kermānshāh; the line that reaches up to Mashhad in Khorāsān. Both road communications, which now exceed 170,000 km, of which 120,000 km paved (2003), and aerial communications have had a notable boost; flag carrier is Iran Air, which links Tehran with the other major Iranian centers, as well as with the Near and Far East and with Europe. Tehran, Eṣfahān, Shīraz and Ābādān are the headquarters of international airports; Ābādān is, or at least it was in normal times, also a large oil port, while the main sea outlets of the country are Bandar-e ‘Abbās, in an exceptional strategic position on the Strait of Hormuz, Bandar-e Khomenī and Būshehr. On the Caspian Sea are the ports of Bandar-e Anzalī and Bandar-e Torkaman. § The remarkable riches constituted by the historical and archaeological heritage of Iran make it a destination for cultural tourism.

Iran Economic Overview