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Iran draft budget slashes oil dependency

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(Globalpost/GlobalPost)

Iran on Wednesday unveiled a draft annual budget that envisages a 40-percent decrease in vital oil revenues, heavily restricted by international sanctions, media reports said.

The new budget expects $30 billion (23 billion euros) in oil earnings, down from $51 billion expected last year, and far below the more than $100 billion of actual earnings in the year ending in March 2012, the reports said.

It asks for 7,305,000 billion rials ($197 billion at the free market rate and $595 billion at the official rate), a rise in rials of 31 percent on the previous year.

But Iran's currency has lost more than 70 percent of its value in the past year, and the draft did not set the exchange rate used in calculating the budget.

The bill, presented to parliament on Wednesday after a delay of 84 days, does not give an estimate for oil exports in the next Iranian calendar and fiscal year starting mid-March.

Iran, once the second-biggest crude exporter in OPEC, said in December that its oil revenues had halved due to the effects of sanctions.

"The oil price used in the budget has been set at 95 dollars" per barrel, budget official Rahim Mombeini was quoted as saying by the Mehr news agency.

"We expect oil prices not to fall below 100 dollars."

Mombeini had said in December that the new budget would be "extremely contractionary" due to international sanctions.

The Islamic republic's economy is struggling to cope with the punitive measures targeting its oil and banking sector that Western powers have imposed in a bid to curb Tehran's disputed nuclear programme.

The sanctions have led to higher import prices, increased inflation, lower foreign investment and difficulties in repatriating currency, in particular in the oil sector, according to experts.

The decision to omit vital oil export and exchange rate figures was taken since their disclosure would have "political" repercussions and also create "problems," local media quoted Jafar Qaderi, an MP in the budget commission, as saying on Tuesday.

President Mahmoud Ahmadinejad said at the weekend that his next budget would have "the least... dependency on oil revenues," as a way of countering Western sanctions, with tax hikes and "sharply decreased" expenditure to offset the loss of income.

The draft budget needs to be approved by parliament and the Guardians Council, Iran's highest legislative authority.

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http://www.globalpost.com/dispatch/news/afp/130227/iran-draft-budget-slashes-oil-dependency