Saeed Leilaz

Based on the existing evidence, during 100 years of oil industry in Iran, that is, from June 1899, when the first oil well hit oil near Masjed Soleiman up to June 2008, a total of 65 billion barrels of Iran’s oil resources have been extracted and sent into domestic and foreign markets. Taking current value of Iran’s exported oil as criteria, Iran has produced more than 7,300 billion dollars of oil during the past 100 years, which amounts to about 24 years of Iran’s gross domestic product (based on 2008 projection which stands at 300 billion dollars). Therefore, the value of oil we are currently producing is roughly about 25 percent of the country’s gross domestic product. Of course, if the price of Iranian oil during the current year (excluding price of gas and condensate) is taken as a basis for calculation of gross domestic product, it would transpire that oil revenues account for 50 percent of our gross domestic product because out of 300 billion dollars of this year’s domestic production, about 160 billion dollars can be attributed to oil. If 10 billion dollars were reduced as cost price, it would still account for half of Iran’s gross domestic product during the current year.

Of course, the 7,300 billion dollars has not been settled to the Iranian treasury, but part of it went to Britain through Anglo-Iranian Oil Company before nationalization of oil industry in March 1951. Another part of oil revenues were never realized as expensive oil has been a late phenomenon which has occurred during the past 10 years. Of course, those 10 years were unprecedented in the whole history of the Iranian oil industry due to long period of high oil prices. Interestingly, the past 10 years have been also unprecedented in terms of oil output and at no other juncture over the past 100 years such a huge volume of crude oil had been poured into domestic and foreign markets.

According to existing figures, 60 percent of total oil output of Iran during the past 100 years is related to the 30 years that have passed since the 1979 victory of the Islamic Revolution. Even if that figure is reduced to 55 percent, although the absolute difference would be enormous, it won’t change the overall situation. Taking 60 percent as basis, Iran has produced about 39 billion barrels of crude oil during the past 30 years, 37.5 percent of which (about 14.5 billion barrels) has occurred in the past 10 years. Therefore, it would be acceptable to assume that the country’s average daily production has stood at about 4 million barrels according to official statements issued by the Ministry of Petroleum. On the whole, the past 10 years account for more than 22 percent of Iran’s total oil output during the past 100 years. That is, share of the past 10 years in total oil production has been 2.2 percent higher than average annual share of oil production. At current prices, the value of Iran’s produced oil over the past 10 years would add up to about 1,640 billion dollars, which would be still 5.5 times the total gross domestic product for 2008.

Although we are currently celebrating the 100th anniversary of oil industry in Iran, in reality, the highest benefits of this industry have been reaped after victory of the Islamic Revolution; both in terms of oil output, and in terms of nominal and real value. Daily production of 6 million barrels of crude oil only occurred over a short period before the victory of the Islamic Revolution; otherwise, average daily production of crude oil during the past 100 years has stood at 1.78 million barrels. Average daily production during the first 70 years, which ended in the victory of the Islamic Revolution, was just slightly higher than one million barrels. Taking the above figures as basis, we would reach the conclusion that the role played by oil in economic, political and social structure of the Iranian society has become more prominent during the past 30 years. If we added the last seven years of the ex-Shah’s rule to the said 30 years, the resulting figure both in terms of output and value, would be so high that the whole history of the Iranian oil industry can be summarized in the said 37 years and forget about the remaining 63 years. Financial evidence also shows, though less accurately, that foreign exchange revenues earned in the first 63 years cannot be compared to the last 37 years of 100-year period. Although this calculation will not reflect the real price or purchasing power in every period, according to figures, total foreign exchange revenues earned through crude oil exports during the past 100 years has amounted to about 715 billion dollars, more than 615 billion dollars of which pertains to post-revolution period. As a result, foreign exchange revenues earned through oil sales during the current Iranian year will be equal to total earning during 70 years before the Islamic Revolution, when two different political regimes and tens of governments with varied political and social viewpoints existed. This means about 110 billion dollars, which is equal to a total of 110 billion dollars in foreign exchange revenues earned through 70 years which ended in Islamic Revolution of 1979.

Therefore, to understand the role of oil in the Iranian economy and its impact on the political structure of the country, there is no need to rely on assumptions and we even don’t need to calculate total revenues during the past 100 years. There is no doubt, according to all documents and evidence, that oil has played a more profound role in all structures of the Iranian society during the past 37 years that it had done over the preceding 63 years. To see what oil has done to political and economic structures of the Iranian society, we don’t even need to review all developments of the past 30 years because the role played by oil during the past 10 years has been more consequential than the preceding 20 years. Finally, it seems that to review the role played by oil in Iran during the past 100 years, it would suffice to study developments of the current year. The projected oil revenue for the current Iranian calendar year alone is 12 times that of 1998 and, based on nominal parity of the US dollar, is equal to total oil revenues in 70 years which ended in 1978.