Dr. Hussein Abdoh Tabrizi, Economist

Iranian economy is like a computer which is not connected to the Internet. It cannot avail of the benefits of an Internet connection, while being immune against viruses and other untoward effects of the Internet.

However, a major financial crisis has engulfed the world. It began in August 2007 and reached its peak in September 2008. Many banks and financial institutes went bankrupt. It has had, and will have, three major effects on the economy of the Islamic Republic of Iran:

1. Financial crisis, shortage of liquidity, declining value of funds which invested in production of basic goods and oil, and slowed down economic growth in many advanced countries have reduced price of basic commodities, especially crude oil. Declining price of some commodities like steel and copper has brought down index of Tehran Stock Exchange. However, reduced oil price is more consequential to the Islamic Republic of Iran. A government, which has sold oil at 140 dollars per barrel and was looking forward to selling it for 200 dollars per barrel should now adapt its plans to an oil price of 70-75 dollars per barrel (if prices do not further fall) and this is very difficult for a government which has got used to spending petrodollars. A government which did not appreciate high oil prices and instead of spending oil sale revenues on promoting production and rendering better services, only fanned the flames of inflation should not be concerned about dwindling oil price. Of course, low oil price may be taken to mean that Iran would have to pay less on imports and if a correct decision is made, the Islamic Republic of Iran can avail of lower prices to import needed foreign machinery and goods.

2. The second impact of global financial crisis is limitations considered for granting credits to Iranian economic corporations. Iranian companies and institutes which have been facing great difficulties in recent years due to complexities in political relations between Iran and the West as a result of Security Council resolutions, are trying to get their hands on foreign financial sources by any means. Now they are facing conditions when credit crunch has been sweeping the world. There is not enough money either in the country, or in foreign financial institutes. Their money comes from loans. Now neither Iranian banks, nor foreign ones are ready to grant loans. The global financial crisis has put double pressure on Iranians who were looking for foreign financial facilities.

3. The third impact of the crisis should be taken as positive. If our government acted reasonably, it would be possible to facilitate Iran’s trade relations with other countries and use their capacities to water down impact of US sanctions against Iran.