Iran's Khamenei urges oil-free economy as crude sales shrink

Iran's supreme leader has underlined the need for an economy independent of oil as the country's crude exports continue to plunge amid US pressure on Tehran's customers.

al-monitor Iran's Supreme Leader Ayatollah Ali Khamenei speaks live on television after casting his ballot in the Iranian presidential election in Tehran, June 12, 2009. Photo by REUTERS/Caren Firouz.

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ali khamenei, us sanctions on iran, jcpoa, iran nuclear deal, iranian oil

Aug 21, 2019

Supreme Leader Ayatollah Ali Khamenei said the "easy" income from crude oil exports is a "longstanding problem" in the Iranian economy that has hindered the country's progress. During a meeting with President Hassan Rouhani and members of his cabinet, Khamenei called for an economy independent of crude exports and encouraged a closer focus on domestic productivity.

Iran's lifeline oil sector has been significantly strained due to the US "maximum pressure" policy that has a stated goal of driving Tehran's oil exports to zero. In so doing, the government of President Donald Trump has refused to extend sanctions waivers granted to Iran's major oil buyers including China, India and Turkey.

While Iranian oil shipments to those destinations have not fully stopped, the figures are gloomy. July sales marked a dramatic 78% plunge compared to last year at 100,000 barrels per day, a level unseen since the Iraq-Iran War. Yet the Iranian authorities have persistently claimed they will bypass sanctions by maintaining the flow through unconventional channels.

In his Aug. 21 speech, Khamenei cited the example of "certain countries which have witnessed eye-catching growth without a single drop of oil." A major concern with an oil-based economy, according to Khamenei, is the pricing system manipulated by the world's biggest consumers, who "can pressure the producing countries based on self-interest as well as political considerations."

The economy has been a recurrent motif in Khamenei's speeches, particularly in his emphasis on the policy of a "resistance economy." The concept has acted as an umbrella directive to the Rouhani administration to be pursued through boosting domestic industrial enterprises, whom Khamenei described as "soldiers" in the "economic war." Iranian officials have been using the term in reference to the US sanctions against their country. At the same meeting, Rouhani lashed out at Washington for waging "economic terrorism" against the Iranian nation.

Tehran has been vehement that the US economic penalties are hitting the ordinary citizens hardest, especially those in dire need of vital medicines. Those sanctions were reintroduced by the Trump administration after it departed from the Iran nuclear deal in May 2018.

Ever since, Tehran has expected the remaining European signatories to move toward materializing the promised economic dividends. After a year, a frustrated Iranian government announced that unless concrete steps are taken by the Europeans, it would make phased breaches of commitments it undertook in the accord, and has indeed done so. The strategy, Rouhani told the supreme leader, is the "right path." He warned the Europeans that if the ongoing talks fail to bear fruit, Tehran will stick to its planned breaches. "We have made it clear to them that our patience has limits. We cannot afford to stay fully compliant while they keep violating the terms," he said.

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