Cheaper Oil Is Squeezing Iran

November 26, 2014 2:20 PM

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The recent drop in oil prices is making American consumers happy as they enter the holiday season. As fuel prices go down, consumer confidence and spending go up, and the economy strengthens. The opposite is true in Iran, where both the state and private sector are heavily dependent on high oil prices. Indeed, while President Barack Obama resists calls to restore some sanctions on Iran, the low oil price operates as a sanction by default.

The Iranian budget for 2014/15 is based on a $140 per barrel price--whereas the current price is $80 per barrel. This means a huge deficit in the Iranian budget. Iran can cover it by austerity measures--cutting subsidies of food, fuel and housing – but its leaders fear that such steps will bring upo...

Also read: Pompeo says U.S. to impose 'strongest' sanctions on Iran

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