Iran's Khamenei: reliance on oil sales a "trap"

DUBAI Mon Jul 30, 2012 3:44am EDT

Iran's Supreme Leader Ayatollah Ali Khamenei (R) meets with members of the Assembly of Experts in Tehran March 8, 2012. REUTERS/Khamenei.ir/Handout

Iran's Supreme Leader Ayatollah Ali Khamenei (R) meets with members of the Assembly of Experts in Tehran March 8, 2012.

Credit: Reuters/Khamenei.ir/Handout

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DUBAI (Reuters) - Iran should wean itself off sales of its vast oil resources to power its economy, the country's clerical supreme leader Ayatollah Ali Khamenei said, as its crude exports become increasingly hampered by Western sanctions.

Revenues from crude oil sales supply about half of Iran's national budget and make up about 80 percent of its foreign exports, but the Islamic Republic is struggling to find buyers for its crude, with top Asian consumers cutting purchases as Western sanctions choke off business.

Separately, President Mahmoud Ahmadinejad acknowledged the "difficult conditions" Iran faced as a result of international sanctions levied against Tehran's disputed nuclear program, and urged the government to save money to deal with the problem.

"Crude (oil) sales are a trap which we inherited from the years before the (1979 Islamic) Revolution," Khamenei said to a gathering of researchers and scientists on Sunday evening, in comments published on his official website.

"Unfortunately, the country has been stuck and efforts must be made so that the people of Iran are freed from that trap."

Khamenei said it was important the country reach a point where it could easily shut down its oil wells and stop selling crude products, according to the published statement.

"It is possible to reach these conditions by relying on science and the knowledge base," Khamenei said, without elaborating further.

Ahmadinejad used windfall earnings from record oil prices in 2008 to go on an import spending spree, which critics said hurt domestic industries and caused a spike in inflation.

Iran's exports have declined steadily this year from the 2.2 million barrels per day (bpd) average in 2011, as its oil buyers cut imports to comply with U.S. and European Union sanctions aimed at forcing Tehran to give up its nuclear program.

Since the sanctions were tightened early this year, Iran's currency has flagged and prices for basic goods have soared.

In a meeting with legislators on Sunday evening, Ahmadinejad said the country's leaders must work "hand in hand" to exit the current crisis, according to the Islamic Republic News Agency (IRNA), saying the legislative and executive branches should look for areas to save costs.

"Everyone should accompany the government by cutting costs and transforming stagnant property into productive assets," Ahmadinejad was quoted as saying.

Ahmadinejad, now in his final year as president, has faced intense criticism of his economic policies from conservative rivals in the parliament.

"The enemy is putting great pressures on the country and has fostered difficult conditions," Ahmadinejad said, according to IRNA. "But this is where we must once and for all make the enemy disappointed and regretful of its approach and actions."

Khamenei and other Iranian officials have acknowledged the sanctions' bite, but have urged the adoption of a "resistance economy" in response to the crisis, emphasizing greater reliance on domestic producers rather than imports, though they have yet to present a detailed plan on how to do so.

(Reporting by Yeganeh Torbati; editing by James Jukwey)

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