Are falling oil prices pushing Iran to make risky economic choices?
Tehran Iranian officials are adamant that the precipitous drop in global oil prices that has slashed domestic spending across the oil-producing world will not bring the country to its knees.
But the latest state budget reintroduces a controversial program to sell exemptions from mandatory military service an indication of just how hard the oil-dependent economy has been hit by falling prices and years of sanctions over its nuclear program.Indeed, for President Hassan Rouhani, the economic hit comes amid delicate nuclear negotiations, and makes the potential economic boon from any deal that much more attractive.
Military exemptions havent been sold in more than a decade, and critics say the policy risks deepening a social divide in Iran between haves and have-nots.
But for one square-jawed, 34-year-old Iranian, at a party with friends in north Tehran, the provision brings deep relief.
We buy back two years of our life, says Shayan, as several other military-age men within earshot nod approvingly. All of them would qualify for the controversial measure, and say theyre willing to pay the necessary thousands of dollars.
But while Shayan and upwards of 2 million young men may rejoice at being given the option to bypass their military service, the plan speaks to Iran's current economic stress.
President Rouhanis government recently slashed the basis of its new budget from $72 per barrel of oil to $40, and the oil minister last week defiantly declared that Iran can withstand further falls to $25 per barrel.
Rouhani even asserted that his government had drafted Irans least oil-dependent budget, and warned that other oil-producing countries like Saudi Arabia and Kuwait will suffer more than Iran.
But GDP growth, which has been steady for a decade at about 5 percent a year, is expected to be at least halved in the coming fiscal year, to 2 or even 1 percent. And earlier hopes in Tehran of a doubling of oil revenues to $60 billion in the coming year are being dashed, with the figure likely to remain, like last year, just $30 billion.
That is a fraction of the $100 billion per year enjoyed by the government of Mahmoud Ahmadinejad, the arch-conservative former president, before Rouhani was elected 1-1/2 years ago with the promise of fixing an economy damaged by sanctions.
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Are falling oil prices pushing Iran to make risky economic choices?