Published On: Sun, Dec 7th, 2014

Rouhani Warns of Budget Slashing Due to Falling Oil Price, While Iran Denies It Made Concessions on Nuclear Program

Hassan Rouhani

Iran’s President Hassan Rouhani said he expects oil prices which are at a five-year low to impose “short-term pressure” on his government’s budget, in the midst of efforts to curb the country’s inflation.

Crude oil prices have declined by about 40 since June, the result of overproduction and slow demand. When the Organization of Petroleum Exporting Countries decided in late November to maintain production levels, it brought on a sharp drop in crude prices, down to less than $70 a barrel—the lowest it’s been since 2010.

As a result, Rouhani said today in a speech to parliament, “It’s necessary for next year’s budget to be adjusted with caution.”

Iran’s new budget year starts March 21, 2015, and the country will have to rely on its non-oil exports, hoping that its inflation rate will slow down to below 20 percent by March, Rouhani said. Current inflation is at 23%.

The drop in crude prices coincides with international sanctions over Iran’s nuclear program, sanctions that are already curbing crude exports—which are Iran’s main source of income.

With the deadline on the nuclear talks extended until July 1, 2015, Iran will have to wait another half a year to be allowed to boost its exports.

“It looks very, very tough, ” Robin Mills of Manaar Energy Consulting told Bloomberg. “Even after sanction are lifted, we still might be in for a couple more years of lower oil prices. They’ve got to plan for the long haul.”

But will the intensified economic hardship force Iran to concede more of its nuclear program than it has done over the past decade and a half? Not if you listen to the Iranians.

After an AP report cited the Obama administration as telling members of Congress it has won significant concessions from Iran for extending the nuclear talks until the summer—concessions that supposedly include Iranian promises to allow snap inspections of its facilities and to neutralize much of its remaining uranium stockpile, the Fars News Agency denied everything.

It reported instead that spokesman of the Iran Atomic Energy Organization of Iran (AEOI) Behrouz Kamalvandi has dismissed those optimistic reports.

“The conditions for extending the nuclear negotiations to July 1, 2015 were like the conditions reining the extension of the previous deadlines and no new undertaking has been added to it, ” it quoted Kamalvandi as saying on Saturday.

And a different source “close to the Tehran-powers negotiations” told FNA Sunday about western reports that Iran has stopped tests on the new generation of centrifuges, “this is not true at all and the trend of R&D on enrichment is moving along its natural track at the AEOI.”

So, for now, the Iranians are brave, but also hungry…

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