Iran’s oil revenue analysis

Author: Farzin Vajihi, former IHS MARKIT Oil Market Analyst

What is Iran’s oil revenue?

In the last year, energy economy experts have constantly made serious doubts to the reports of Raisi’s administration about the number of oil exports. Now, one of the supervisory institutions of the Islamic Republic has published a report based on which it has been determined that the government’s claims are baseless and that Iran’s oil exports are much lower than official reports.

In the last year, Ebrahim Raisi Iranian president has always claimed a significant increase in oil revenues in the new government, refer to reports whose authenticity is doubted by experts. Relying on these controversial reports, the President of the Islamic Republic of Iran claimed that he could bypass the oil sanctions and increase the income from Iran’s energy exports. But recently, a report has been published that shows the falseness of the statistics claimed by Ebrahim Raisi.

Supreme Audit Court’s Report

The Supreme Audit Court of Iran is a supervisory institution, one of whose tasks is to publish a report on the annual budget implementation process by the government. This institution, which publishes a “Budget liquidation” report in the 6th year, has recently provided information to the media. At first look, Iran’s Supreme Audit Court has tried to confirm the statistics provided by Raisi.

In the first four months of 2022, it has been reported that the collection of oil revenues has increased by 5 times compared to the previous year. However, by going into the details of this report, one can clearly see the falsehood claims by the President of Iran.

The government is behind on its schedule.

Last week, the Supreme Audit Court claimed that the oil revenues in the first four months of this year have increased by 5 times compared to the same period in 2021, without mentioning the amount implementation of budget. According to the budget law of 2022, the oil revenue in this year’s budget was 481 thousand billion tomans ($17 billion).

According to the announcement of the Supreme Audit Court, it is now clear that the total of these revenues in the first four months of the year was 66 thousand billion tomans. This is even though, according to the budget law, oil revenues in the first four months of this year must be at least 160 thousand billion tomans ($6 billion). According to the budget law give to the Iran Parliament (Majlis) in the fall of last year, the government has only managed to implement 42% of the projected oil revenues.

２. Revenue growth due to global oil price jump

As mentioned earlier, in this report, the five-fold growth of oil revenues in the first 4 months of the year compared to the same period in Rouhani’s administration had been emphasized. But in the budget liquidation report is not considered the increase of more than 70% in the price of oil in the global markets.

In fact, the increase in oil revenues is not directly related to the government’s ability to collect money from exports, but the jump in global oil prices has been ignored in this report. However, it is still unclear which institution is the source and authority of this report and whether the mentioned numbers and statistics are based on the estimates of the Supreme Audit Court Is there any documentation for this report?

It should be noted that the selling price per oil barrel is considered 70 dollars in this year’s budget. But experts believe the average sale of Iranian oil has exceeded 80 dollars. According to this point, the government has not implemented about 60% of the projected income, even though it has sold oil at a higher price than expected.

3. A currency hoax

Another case of ambiguity that was not mentioned in the report of the Supreme Audit Court is the base currency used to calculate the Rial equivalent of oil revenues this year. Currently, the currency market is seeing 6 different prices for the dollar, each of which has significant differences. It is still unclear which of these 6 price groups is the currency that was the basis for preparing this report.

On the other hand, the Supreme Audit Court did not mention the dollar equivalent of the government’s revenues in the first 4 months of this year compared to last year. This is while the report of the Supreme Audit Court in 2021 was calculated based on the government exchange rate. But at the beginning of 2022, the Raisi’s government completely changed the game by changing the currency rate process. Therefore, it is unclear which exchange rate the report of the Supreme Audit Court set.

Some experts believe that the oil revenues mentioned in the Budget liquidation report of 2022 were calculated using the free or semi-free exchange rate. In this case, it is possible to discover the secret of the massive difference in oil revenues in the first 4 months of this year compared to last year. In fact, Raisi’s administration, with the help of the country’s audit bureau, has tried to increase export and oil revenues by manipulating foreign exchange.

Lost trust…

According to the points mentioned in this report, the impact of the pressure on the Islamic Republic is clear and undeniable. In a way, Raisi is trying to hide the pressure on Iran’s economy by creating statistics. However, the statistics and figures announced by the government and the parliament in Iran indicate the deterioration of the economic situation following the increase in oil restrictions.

Therefore, many economic experts believe that, contrary to the claims of the Iranian government, if the pressure increases, the Islamic Republic’s economy will definitely collapse. Some even believe that the continuation and intensification of Trump’s maximum pressure can make Iran’s economy suffer the fate of Venezuela. This group of economists believes that the ineffectiveness of the Raisi’s government’s economic team and the ineffective nuclear negotiations will lead to far more difficult months for the Iranian people.

The government cannot even sell as much oil as in recent years (after the withdrawal of the United States from the JCPOA) and is trying to manage the public mind by manipulating statistics. But people seem to have lost their trust in the reports of the 13th head of state. In such a situation, it seems unlikely that the government will be able to enrich public opinion by worsening living conditions.

The people of Iran do not believe in Raisi’s honesty and do not know him as an informed and intelligent person to trust his statements. In the end, it can be said that Raisi has lost his limited social capital by presenting false statistics. Even worse, the oil revenue has not increased, which the government can use to control the situation.