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WORLD> Middle East
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Iran's president concedes oil prices hurt economy
(Agencies)
Updated: 2008-12-04 11:08 TEHRAN, Iran -- Iran's hard-line President Mahmoud Ahmadinejad has acknowledged publicly for the first time that his country's economy is taking a severe beating from tumbling oil prices, a damaging admission for a populist leader who faces eroding popularity and a tough re-election battle next year.
Oil prices have plunged more than 60 percent since July as a faltering global economy reduces demand. Ahmadinejad said that will force the government of the world's fourth-largest oil exporter to make painful spending cuts, the official IRNA news agency reported Wednesday. Ahmadinejad said his government would have to lower its expectations of oil revenues when planning next year's budget, which is largely financed by oil exports. But he admitted that means "we have to leave a major part of our projects behind." Only a month ago, officials in the president's office said they planned to base the budget on an oil price of $50-$60 a barrel. "But we are obliged to set it at $30-$35 because we do not decide the price of oil on the global market," the president said. For months, the weakened president, who is seeking re-election in June, had sidestepped his own country's troubling unemployment and inflation figures in his remarks on the economy. Instead, he took shots at the United States, which he accused of exporting financial problems to the rest of the world. Just last month he boasted that even if the price of oil sank to $5 a barrel, Iran's economy would be fine. Now, the president says Iran's government has no choice but to trim spending and generous subsidies and raise taxes. Ahmadinejad is already under sharp criticism for his unpopular economic policies. In November, 60 economists wrote their third letter to Ahmadinejad since 2006 blaming him for skyrocketing inflation caused by the huge sums of oil money that his government injected into the country's economy. Ahmadinejad promoted the cash injections as a way to stimulate job creation. However, unemployment has increased to around 10 percent. Possible rivals in June's presidential election, particularly former nuclear negotiator and moderate conservative cleric Hasan Rowhani, have seized on Ahmadinejad's vulnerability, noting that Iranians are poorer and the economy is suffering. They and other critics accuse Ahmadinejad of squandering the opportunity presented by soaring oil prices over the past three years and failing to use the higher income to insulate Iran in tougher times. The president has also drawn criticism for his hard line on the standoff with the US and other major international powers over country's nuclear program, which has helped isolate the country. Political analyst Mostafa Mirzaian said Ahmadinejad's handling of the economy was hurting him especially with middle class voters who are "already complaining whenever they have the chance." Diving oil prices and their impact pose the biggest threat to the president's eroding support. Oil prices have plunged from $147 a barrel in July to under $50, adding to the pain of Iran's rising inflation and unemployment. Iran, the second largest OPEC producer, is deeply dependent on oil exports. About 80 percent of its foreign revenue comes from those sales. |
