Iran should ban imports of luxury and non-essential goods given falls in crude oil prices, central bank governor Mahmoud Bahmani was quoted as saying. The world’s fourth biggest crude exporter and number two producer has become increasingly reliant on higher oil prices to balance its books. Some analysts say Iran needs its crude at US$70 to US$75 a barrel to keep its current account in the black [The IMF has put the figure at $95 a barrel.].

Oil has tumbled to half the record of US$147 a barrel set in July, with US crude trading at about US$72. Iranian crudes tend to sell at a discount to the US benchmark [due to its lower quality], which means prices are close to or below levels some estimate Iran needs.

“In view of the drop in the world price of oil in the past three months, there is the possibility of not realizing part of the projected budget income,” Bahmani was quoted as saying in the Jahan-e Eqtesad daily. Another central bank official this month said the oil price slide rang an “alarm bell”.

President Mahmoud Ahmadinejad, who is expected to run again for the presidency in 2009, has said Iran is more immune than others to the financial crisis. UN and U.S. sanctions over its nuclear plans mean Iran has increasingly few links with Western banks. But analysts say the government, already under fire over policies blamed for stoking inflation, cannot be complacent.

Government critics say soaring inflation, which is running at 29% and which they have blamed on government spending, has undermined local competitiveness and encouraged imports.

The government has a reform program, including moves to streamline subsidies and imposing a sales tax, but merchants and the public have opposed the plan, fearing even higher inflation. Economists, including the International Monetary Fund, say Iran must change its policies to stay in the black.

BusinessIntelligence, October 20, 2008