PROFITS FROM OIL IRAN’S HOPES OF BECOMING A WORLD FINANCIAL POWER

Press, Volume CXIV, Issue 33452, 6 February 1974, Page 10

PROFITS FROM OIL IRAN’S HOPES OF BECOMING A WORLD FINANCIAL POWER

ißy lAN COLVIN in the "Daily Telegraph." ) i Reprinted by arrangement) If anyone still clings to the belief that the world owes Britain a living, let him pray. This does not include the Iranians. These wide-awake people have entered the New Year in company with the Arab States who have — at a stroke — trebled their foreign currency revenues. Iranians speak to each other of an oil victory; to visitors coming cap-in-hand in search of oil they speak of an adjustment of market prices, but they do not foresee that those prices will ever take a downward trend in response to market forces. The year 1973 that in its last quarter saw Gulf crude oil prices raised fourfold to a new mean of SI 1.6 a barrel is described by officials in Teheran as the end of an era. the era of cheap raw materials.

The euphoria is high in Government circles, the Shah, in an interview with “Der Spiegel,” telling Western countries to put their houses in order and saying that within a generation Iran will be an economic power equal to Britain or France. Today the skyline of Teheran shows evidence of great vertical wealth. In the ragged fringe of the new society, the trodden snow and chaotic gutters of Teheran streets, and in remote provinces that have not shared yet in the spread of wealth the glad news is heard. There, the hope of those in the midwinter] struggle for existence is that the fifth development plan! (1973-78) into which these] accruing revenues will flow] holds something more for: them.

As the Fifth Plan report) states, the objectives are to) raise levels of social welfare; to ensure more equitable distribution of national wealth and to maintain a rapid economic growth rate. Iranian official objectives for the oil industry are to I penetrate world markets for crude oil and oil products by participation in refining, marketing, distribution and sales operations in major centres of consumption, and to increase the income from oil exports. The latter objective has been achieved with remarkable speed. Penetration of world markets in face of the giant oil corporations will be pursued with the remorselessness of people still haunted by the notion that others may still be making more money out iof oil than the country of origin does.

Revenues rise

The Iranian Government is! watchful over its enor-! mously expanding revenue and prepared to insist on discipline in expenditure. Its revenues from oil for this year were estimated at $2600 million before the December oil coup, and now they have risen to $5BOO million. It is difficult to say how far Iran’s expectations were upset by the general rise in world prices last year for raw materials and semi-man-ufactured commodities such as rolled steel and sheet iron. Iranians were distressed by the increases on wheat, rubber, sugar, cement and paper as well as copper and steel. They point out that the conditions being created were discussed at the last two U.N.C.T.A.D. conferences of poor nations, but that the banker and industrial nations of the West were not moved to action. It is sometimes not easy, in listening to Iranian arguments, to imagine quite in which camp the Iranians claim to be, but they have assumed a middle position of being at once very affluent and yet burdened with many of the handicaps of the undeveloped countries

I that have no oil treasury [under their soil. I There is no contrition, if perhaps a certain embarrassment, to be detected in the Iranian attitude towards the near past. The Shah sees what hr s happened as part of his life struggle against vampire forces that once subjugated his country to, foreign domination, neocolonialism, capitalism and of course the oil companies, whose financial and administrative influence on the growth of Iran receive so little recognition today.

Import prices

The year 1973 must be recalled as that in which the Shah demolished the last vestiges of authority and responsibility in the oil consortium here, relegating the companies to a subordinate role in return for a 20-year purchase agreement. By the time the crunch came,’ they had no more say. How is this year’s estimated extra revenue of £3200 million to be spent? Higher import prices of raw mat-; erials will undoubtedly ab-! sorb some of it, Mr Amjid Majidi, Minister of State for Planning, tells me. He is much concerned at rising raw material prices and wants to stockpile goods for Iranian industry supplies, not a good time to be doing so in present world market conditions. Mr Majidi expects to repay out of the oil windfall millions a portion of Iranian external debts that is causing irritation by reason of high interest rates. But there is no intention to repay prematurely on other loans made to Iran as a developing country on very favourable conditions. There will be important investments abroad in countries that can provide food to meet the growing needs of a society becoming industrialised with higher standards, such as Iran’s. There is, finally, the prospect of cash payments for arms orders made by the Iranian Government in the West. It is difficult to imagine that the Shah, though he has set himself up as the great ecologist, will limit his ■ country’s oil production ini any way as Arab States have done. He is too committed to rapid industrialisation to be able to forgo the revenues that go with full production. An expectant people has hungry eyes fixed upon his “Great Civilisation.” To determine how world prices shall be controlled in future he favours a high-level conference between countries of the Organisation for Economic Co-operation and Development and the oil-pro-ducing States’ organisation.

Gold as medium

It is said that gold has been thought of as a medium for co-ordinating oil and raw material and finished goods prices. His Ministers, with their eye on present shortages of materials, prefer to think of bilateral agreements, such as that sought with Britain on a range of raw materials and with Japan in the oil industry and petro-chemical field. Iran has its Achilles heel, and certain known weaknesses under the golden armour. The Shah’s Midas touch cannot all at once remove the remaining 60 per 'cent illiteracy that handicaps | the big leap forward into the ranks of the first league of Powers. Despite the assertion that Iran is among the [first 15 for wealth, she has [no iron and steel production, i Although there is general acceptance of the Shah’s programme for his country there are young people who criticise privily, and a recent

trial of 12 Iranian con(spirators from middle class I backgrounds, who talked about killing the Shah and 'ending the regime, indicates that if things went unex pectedly badly, there could be a latent oppositon. The republican coup in neighbouring Afghanistan has had ,-a disturbing effect. However, Premier Hoveida (appears to me to have buoyancy and confidence despite the precarious course set by h : ; Imperial master in the economics field. The British may regret their decision to leave the Persian Gulf in 1967, though defence costs of around £25 million a year were an inexpensive premium of insurance for their many interests in the area. The economy was urged on grounds that the companies would look after the oil. The exit made its impression on 'the Shah and subtracted 'from British influence by a costly sum.

It is, of course, important that British pots and Iranian kettles should not denigrate each other and pursue their ico-operation in the knowledge that worse things could happen in this sensitive area than for oil prices to drop below the notional figure of $11.6 a barrel. Our man in Teheran, Sir Peter Ramsbotham, has made a brave show of understanding the Shah's policy for his country, detrimental though it may be to Britain. But privately there is consternation among those British who have lived with the oil saga since early days. They are scandalised that the Iranian Government held small auctions to mark up scarcity prices. They fear that a movement is starting in policies that could ruin (Europe, and even if that can 'be averted, could leave Iran dangerously isolated from ithe West.