NEGATIVE/ROGUES/IRAN

A DROP IN OIL PRICES WOULD RUIN IRAN

ALSO IMPACT TO OIL DISADVANTAGE

IRAN IS UNIQUELY VULNERABLE TO A DROP IN WORLD OIL PRICES

Janet Matthews Information Services, World of Information Country Report November 2, 1999 SECTION: Comment & Analysis; Country Profile; Statistics; Forecast; Pg. 8 HEADLINE: IRAN: INTRODUCTION // ln-acs 12/18/99

The collapse of Asian markets and the worldwide demand for oil damages Iran in three ways. Firstly, economic concentration in this sector has made Iran especially vulnerable to a sharp decline in the price of crude. This is exacerbated by the high sulphur content of Iranian oil, which limits the number of refineries capable of processing it. Consequently, with a glut of oil on the market many refineries will concentrate on higher grade crude from elsewhere. Japan, which is one of Iran's principal trading partners, has been hit especially hard by the economic fallout and declining Japanese demand for Iranian oil has been particularly severe.

OIL PRICES MUST RISE FOR THE IRANIAN ECONOMY TO IMPROVE

It is vital that the price of oil rises substantially if the Iranian economy is to experience significant growth. Recent trends indicate that this is unlikely, and it is doubtful that the non-oil sector will be able to fill the vacuum. The structural adjustments that would reduce this reliance are unlikely in the medium-term for several reasons. Firstly, trade revenue will remain insufficient to provide funds to develop other sectors, or indeed modernise the oil infrastructure. Secondly, government policy is constrained by the five- year development plan that ends in 2000 and constitutional bars on economic liberalisation. Finally, even if that were not the case, in the current situation the government would be unlikely to risk the hyper-inflation that would occur if the economy was opened up or the rial floated internationally. Despite the need to begin extensive and long-term economic restructuring in 1999, the government will instead be forced to engage in fire-fighting, at least in the short term.

IRAN HAS HUGE OIL RESERVES

Afshin Molavi, The Washington Post December 10, 1999, SECTION: OP-ED; Pg. H01 HEADLINE: Iran MendsTies With Europeans; Businessmen Find Myriad Opportunities // ln-acs 12/18/99

A key member of the Organization of Petroleum Exporting Countries bounded by the strategic Persian Gulf and Caspian Sea, Iran possesses the world's fifth-largest oil reserves and the second-largest gas reserves.