Iran and Oil

Iran's economy is dominated by trade. Because nearly all of Iran's oil export terminals and large ports are located within the Persian Gulf, Iran depends on the Strait of Hormuz for its economic well-being. Closing the Strait would certainly hurt the Iranian economy.

Like many other Persian Gulf countries, Iran's economy depends on oil export revenues, the bulk of which traverse the Strait of Hormuz. Iran exports about 2.6 million barrels of oil per day, and oil export revenues account for some 85% of all Iranian government revenue.[i] Due to insufficient domestic refining capacity[ii], Iran also relies heavily on the Strait for gasoline imports, estimated at 400,000 barrels per day.[iii]

Roughly 90 percent of Iran's oil exports pass through the Strait of Hormuz each year,[iv] representing approximately 83 percent of all Iranian exports.[v] Iran's oil export facilities are all located in the Persian Gulf. The only major oceanic port, Chah Bahar, has no deepwater piers (capable of handling large oil tankers) or pipeline infrastructure connecting it to Iran's oil infrastructure. Therefore, Iran's oil exports must traverse the Strait.

Iran also relies heavily on foreign imports to sustain itself. Between 2005 and 2006, Iran's total imports grew from $29.5 billion to $38.1 billion.[vii] In that same time period, Iran's imports of raw materials and intermediate goods grew by 38.7 percent, accounting for 47.8 percent of all imports in 2006 with an overall value of $16.8 billion.[viii] Iran's imports of capital goods also grew to $12.1 billion in 2006, comprising 34.2 percent of total Iranian imports.[ix] Together, these imports accounted for 82 percent of Iran's total imports and were valued at just over $29 billion in 2006.[x]

Iran is currently the world's largest importer of gasoline after the U.S.[vi] Dependence on imported gasoline has steadily increased since 1979. This situation is exacerbated by Iran's heavy gasoline subsidization, which encourages domestic demand. Recent efforts to reduce the amount ofgas subsidies (that is, to increase the consumer price ofgasoline) have led to riots.

[i] CIA World Factbook, "Iran," last updated on August 7, 2008 (accessed August 13, 2008), https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html.

[ii] Roger Stern, "The Iranian Petroleum Crisis and United States National Security," Proceeding of the National Academy of Sciences of the United States, vol. 104 no. 1 (January 2, 2007).

[iii] Energy Information Administration, Country Analysis Brief: Iran, October 2007.

[iv] Interview with Lloyd's Marine Intelligence Unit, London, UK, February 18, 2008.

[v] Based on 2006 data. International Monetary Fund, Iran: Statistical Appendix, 2006.

[vi] Energy Information Administration, Country Analysis Brief: Iran (October 2007).

[vii] "Economic Report and Balance Sheet 1383 (2004/2005)," Central Bank of the Islamic Republic of Iran, (March 20, 2005), p 54.

[viii] "Economic Report and Balance Sheet 1383 (2004/2005)," Central Bank of the Islamic Republic of Iran, (March 20, 2005), p 56.

[ix] "Economic Report and Balance Sheet 1383 (2004/2005)," Central Bank of the Islamic Republic of Iran, (March 20, 2005), p 56.

[x] "Economic Report and Balance Sheet 1383 (2004/2005)," Central Bank of the Islamic Republic of Iran, March 20, 2005, p 56.

This page last modified in August 2008