NATIONAL INTELLIGENCE SURVEY 33; IRAN; THE ECONOMY

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• Collection: NIS
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SECRET
33! GS/ E
Iran
May 19'3
I NATIONAL INTELLIGENCE
SECRET
NO FOREIGN DISSEM
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AD
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This chapter was prepared for the NIS by the
Central Intelligence Agency. Research was sub-
stantially completed by January 1973.
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lira
CONTENTS
This Genrral Surrey supersrdrs the orr dated V o-
rember 1969, copies of which should be drstroyrd.
A. Introduction 1
Brief assessment of the effects of rapid develop-
ment.
B. Economic appraisal 1
World oil position; GNP aad indicators of eco-
nomic growth; investment and policy obiertisec;
inflation.
C. Structure of the economy 3
Sectoral distribution of GNP.
1. Agriculture, fisheries, and forestry 3
a. Agriculture 3
Failure to meet domestic demand, laid
utilization and irrigation.
SECRET No Fottit:u:x DISSEM
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Page
4 1 1) Land trfo m 5
Aims stni i+tnnwot"; slatioh., tm
Jisttilnitio"i A ral tm "-wih 44 i"-
attetatheA. limited hrt.rfit..
(2) Gtvetmnent policy
i mrl jwwnt Plan RW*als. insr.tmcnt
piintio".
(3) Principal crops
Pttwhictir n data MI
axl f aetotr behitxl vattatiom.
(d) Opium
1!i1 M han; rtpanovin of cidtiva.
hOn. vnimAt. atxl ratrungs.
(3) Uvmtock
Imrotory atxl Pr.xluct
h. 1= ishe m
Catch and 41mi -k pment potential.
C. Ftte-stry
Mainly fuc-iwoxxl aril lumhrt.
2. Forts and power
a. Petttilettm
Statmks crti P"Ifluctinn. n-Wr%rs, and e arn-
ing.; Wit III c4 iato.tty. a0vrmrnts with
cirv"him. the ItK;, trfinrtic�s, rilxttts,
atxl ettresrtmptittn.
h. X RS
Rrwmm aml oullxrt, rc.le of N ICC. acnv-
mml wi V.S.S.R.; poxtuction of lique-
I" twttttal Ras.
C. Electric prn%rr
Ptrxitac skin :itmi cv rmumptitm figures, it".
prtxlitctirin Lut lities, vwnrt� hip. an trans
miWan wOrtm.
el. Solid foe -Is
Shatr .4 tcrosumptKm. coil output.
3. Metals awl anine�rais
1'trw!�ct;c.n
Of Irad. Atw. and chmmium ore;
potential Icx ccq'pc�r rsploitation; iron on� and
51ml_
K
K
10
12
12
13
14
1 4
18
18
19
20
Page
4. Manufacturin and construction 22
Production figures, 1965/06- 1970/71, and
e�tnntttaclity groups; Publie and private invest
iuent; building programs and construction ma-
terials.
5. Domestic trade
Type -s and hllluin i5 of establishments; c�mdit
sales.
D. Economic policy and development
1. Policy
a. Role of government
Responsible organizations an c' extent of
influence.
h. Fiscal policy
Budgets; sources of revenuer, expendi-
tures, including those of Third and FouAb
Plans and for defense.
c. Banking and monetary policy
Principal banks; foreign exchange controls;
noney supply.
2. Manpower
Labor force and changes in its sectoral com-
position: productivity; unemployment, short-
ages, and labor policy.
E. International economic relations
1. Balance of payments
For 1965,'66 1971/72.
2. Trade
a. Policy
Regulations and their aims; role of Export
Promotion Center.
b. Trade levels and patterns
Expanding imports of capital and inter-
mediate goods and changing composition
of exports; direction of trade; relations
with EEC.
3. Foreign investment, credit, and debt
Estimates of inve.stment; total of credits ex-
tended by United States and Communist coun-
tries; debt and service payments.
Glossary
FIGURE i
24
25
25
75
25
27
28
30
30
30
30
32
35
36
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Page
Page
Fig. 1
International comparisons of GNP
Fig. 6
Agricultural zones chart)
6
I�rtnvth chart)
2
Fig. 7
Ghanat system of irrigation photo)
7
F ig, 2
Se ovie d eco nontic indicators chart)
2
Fig. 8
The Shahbanu Farah Dam photo)
7
Fist. 3
DkIrihution of GNP chart)
3
Fig. 9
Agriculture and light industry (map)
9
Fig. a
Estintate -d land utilization chart)
4
Fig. 10
Production of major crops (table)
9
Fig. 11
Rice paddies photo)
10
Fig. 5
Awicidlural land distribution (map)
3
Fig. 12
Opium poppy cultivation (map)
11
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Fig. 13
Livestock population table)
12
Fig. 14
Fishing on the Caspian photo)
13
Fig. 15
A fish fano photo)
13
Fig. 16
Oil and gasfields and pipelines (map)
14
Fig. 17
Crude oilpr(;duetion (table)
15
Fig. =8
Oil companies in the consortium
Fig. 31
Money supply (table)
(chart)
13
Fig. 19
Direction of petroleum exports table)
17
Fig. 20
T. refinery photo)
is
Fig. 21
Mining and heavy industry (map)
20
Fig. 22
Production of metals and minerals
Fig. 36
Imports and import payments (table)
(table)
21
Fig. 23
Sugar refining factory photo
22
Fig. 24
Production of manufactured items
Fig. 38
Commodity composition of eo
(table)
22
Fig. 25
Stamping textiles photo)
23
Fig. 26
Index of industrial production table)
23
iii
k-
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Fitt. 27
Fruits llers in Esfahan photo)
24
Fit;. 28
Government finance table)
26
Fig. 29
Government expenditures table)
26
Fig. 30
Government developmental expendi-
tures (table)
27
Fig. 31
Money supply (table)
28
Fig. 32
Labor force by age and sex chart)
29
Fit;. 33
Motorcycle policewoman k photo)
29
Fig. 34
Labor force by economic sector (table)
29
Fig. 35
Balance of payments table)
31
Fig. 36
Imports and import payments (table)
32
Fig. 37
Geographic distribution of imports
(table) I
33
Fig. 38
Commodity composition of eo
(table)
34
Fig. 39
Geographic distribution of nonoil ex-
ports table)
34
iii
k-
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r 4 z,
.tk:-
J
'J
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Control valve, Bid Boland gas refinery (U /OU)
Typical bazaar (U /OU)

The Economy
A. Introduction (U /OU)
Iran plays a key political and economic role in
the Middle East. A country about one -fifth the sizz
of the United States, Iran is located between the
Caspian Sea and the Persian Gulf, bordering on
Afghanistan, Pakistan, the U.S.S.R., Turkey, and
Iraq. The country consists mainly of an interior
area of desert plains, hills, plateaus, and mountains
bounded by a rugged mountain rimland; small fer-
tile areas fringe the Caspian Sea and the Persian
Gulf. The 30.8 million people �over half of whom
live in the countryside are strongly individualistic
with loyalties primarily to family. The small liter-
ate element of the population is concentrated in the
urban yeas. Ruling and guiding the destiny of Iran
is the Shah, Mohammad Reza Pahlavi, who is bent
on developing a cohesive, modern nation.
The momentum generated by the Shah's social,
economic, and military programs has resulted in a
rapid rate of economic development in comparison
with that of neighboring Arab oil- producing states.
Within Iran, however, the efforts toward indus-
trialization and social reforms have led to striking
disparities. Modern houses with beautiful gardens
and swimming pools in parts of Tehran 1 contrasts
with the one -room dwellings and mud huts that
shelter the great majority of families elsewhere in
Tehran and in other towns and villages. Modern
industrial plants have been built to service the ex-
panding needs of the economy; yet Iran still has
hundreds of small handicraft establishments using
methods that have changed little over the centuries.
Age -old bazaars operate in large cities in the
For diacritics on place names see the list of names on
the apron of the Summary Map in the Country Profile
chapter, the snap itself, and the maps in this text.
shadow of modern stores, shops, and service
facilities.
Income distribution continues to accentuate the
differences between rich and poor. The Shah, how-
ever, is making progress in solving these problems.
Many rural dwellers have benefited at least a little
from land reform and expanding social services. At
the same time, thousands have flocked to the cities
without sufficient education or job opportunities
and have swelled the ranks of the unemployed and
underemployed.
Iran's economic development is reflected in its
expanding foreign trade and its more influential
role in international affairs. Although it maintains
strong economic ties with the United States and
other Western countries, Iran also carries on a grow-
ing trade with the U.S.S.R. A sizable share of
Iran's domestic resources and imports is allocated
to the military sector in line with the Shah's con-
cern with Iran's security and regional influence.
B. Economic appraisal (U /OU)
The importance of Iran in the world economy
rests on its role as the fourth largest producer of
crude petroleum� behind the United States, the
U.S.S.R., and Saudi Arabia. Iran's political stability
in the turbulent Middle East has been reflected by
its willingness to fill gaps in the world oil supply
created by war and by politically inspired cutbacks
by other Middle East producers. Between 1961 and
1971, petroleum exports expanded at an average
rate of 14.57o annually, as compared with 10.1`yo
for the remainder of the Middle East. Iran's im-
portance as a world petroleum supplier is assured
for the near future; its reserves are estimated at
about 10510 of the world total, and production is
expected to rise substantially. Similarly, natural gas
1
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IrOes (19GJ =100)
It
110
Zoo
loo
160
140
120
100
r i
Est
JseR
t"M
Isreet
Menke
Tertleq
v#arts�
Egypt
1964 65 66 6 60 69 70 71
�Escleda semces
FIGURE 1. International comparisons of GNP growth,
1964.71 (U /OU)
reserves are the third largest in the world and pro-
vide opportunities for greatly expanded output. In
addition to hydrocarlmns. Iran has resources of cop-
per, iron. and other metals, waic�h are only now
being tapped.
The Iranian economy has been growing more
rapidly than that of lmy other country in the Middle
East. Its gross national pro(bict (GNP) rose at a
much faster rate than that of Egypt and Israel since
196.3 Figure 1), and in 1 971 a�sts more than twice
that of either country. Following a period of finan-
cial retrenchment and economic slowdown in the
early 1960's. Iran embarked on a development pro-
gram which resulted in an average anneal growth
rate of real GNP of IV; from 1964/65 through
19 1/72.- Among the Middle East countries. only
Israel approache.-: flik rate of growth, and its per
e;tpita GNP is, of coutse, fur higlic�r. Imo's phcnoin-
eua) t;ros%�Ih is attributed to large scale public
MA prioate inyeshnent, supported by hiervasing
amounts of foteign fin :ulcial and technological as-
sistance. The go%crnnu�nt has had a strong iiiflu-
enc�e on the deo c�lopinunt pattern of the economy
through public itlsrstinent and throngh regulation
of and incentives to ptivate lnvestnu�nt. The Shah's
policy emphasised the development of industry
higur(- 2). hansporlation, and whic�atiov and the
expansion of the military sector. Imports for de-
velopment and defense have exceeded earnings
from exports; and fran c�ontinucs to rely on inflows
of foreign credit to achieve its growth and develop.
nu�nt objectives. despite reccia lar increases in
earnings from oil.
Rapid growth has given rise to a number of ec�o-
ooinie problems. Educ�:ttimmi levels remain low.
and the country lacks suffivient nl :utagerial person-
nel and skilled workers for its expanding inchis-
tries technical gap that hats been filled largely
by foreign advisers. The rapid development of in-
dustry has been acc�ompauied by a nnmher of
hastily con(�eiyed and costly projects; measures de-
nAr1 t19S9 60.J00
sw
Or/r
rIJO
11Nnh.M aeM
t.MN111w h.lN
Od Re.n.N
4pKrNwN hNwUen
600
soo
am
>o
loo
100
1=41 VV iV U6- 646$ NM 66V V 4 e0 WM A:n 1172
"This nn�tllnd of imlic;Itin1; )�Tara k uW cl thrlmlghoot the
text when the 11;11.1 me from IrmiMn so urow%. The Ir.mi.111
e:ticmL.r year runs from 21 March tip 20 March. 'The� fim.11
year is the� same ;u the r itle�mlar year. FIGURE 2. Selected economic indicators (U /OU)
2
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sign"I to Imi lcct infiltit industtitw Intl" foh�ittn
atnpctiti(m Iran sltclteh�(I itr"fficicnt oiw�talirnls
and led 141 ftielwt t1r%t+ and Ittices. Tlm� emphasis
on itxlmtty .41141 txw411�rt trf arctic altutill ptrdrrctirm
has nvsnitcll in a last in fat" witi""t and histlict f mod
ptices. The tale of inflalio" AckvIrtated ill tiveld
Vears Mid tmr%v is "id"io"t al alrtrut atltnl;dl%
:1ltlxnlsih heel itrcitltn� irt taiita hats cis ('n sharyI%�
sillty World "at 11. the disftihnlion I"as 611"114�
"rein� nw-wn. I'hc ninvt And middle itmtmw� sthnrl"
!trim -Mcd m"t+t. ahily the status i1 lomer itrc,
gtoul s i niml +rd mly slightly. (:tnettrttx�ut plan
ning slrnvs air awah�tm� +s of and tich t tninmtilrn to
cylrnt-t thin scot. itrr cst4n>t dislatih
C. Structure of the nvttomy (l� /Ot�)
Astric hury tsta%id� d alloid 16'; of 1rwi*% im-
titma 01111"11 it Pro I/ 1: istnrr 'I 1 mil vmpLn -etl
almut 37'; W Ih4, la1N"r ftm t�. (Nilpilf cc
lat�rl% of V IN"ml. I.ith. rite. ftnih. mtril tore mt
t mutton and gomt hat thmwilic p1minctism of
f0 "xl has in nvtt�nl .t �mts Ixtwt %opphil"trl "ll 11% in��
pans. Ito t.ndt.4s1. itr tto't.un+ pt xitltsl 2,4" of GNP
in 19 snlhiii�d thoh� Ilan" half of 1114 111411;" t-
am, tchc11ut^s, mtrtl lit "110111 in ti.i' i of Itmti fotriarl
t�xrlt met. catnioc%. Intl cmpl oalr (..i': of t!�t�
total lalmrr mol Iranian i1+411641ty. w hich ilia stto%%
in si /e aull sr rlhistic:ltitm. tttli :hlrntttl .dtta lti';
1 owi
M ,a*... -r a -s..
04 4 t
UA
i t
lift I +r".
FIGURE 3. 1MH"bution of GNP (U10U)
i
A"
ttt+n n
tt- rte,+w.wrll
111 (AT. Ne%v basic indnstncs. snc�h as iron and
%144.1 and i>, fhrch('noicals. and nc%v assemll indu
trios ha%e expan(lecl rapidly. 11111 the traditional
in.lnslties �1 'Mile. tnan11factminu. brick pnxl11c�-
lion. etc.-- vinphy the Balk of the i idw trial work
fottc and ptolalrly still acconttt for the major part
of indo.-Mill %aloe addccl.
The setvicrs Bettor Ilia expanded at rout;hl%� the
smolt. tale ;t: o� "tall GNP. %%ith the larews' hiercase
takinst plats� in public admini- tration anti def('nse.
11A11king and insurance have grown at it faster
pate than '..':1', n�flectin;t in part the shift from
it hatter to it now-v etonom% 1lataars, the tradi-
tionml tt 11t, r% of ctirtnnrrce Mid fin.11c�e, still are
fotrd in A11.,1410 Al cities, hwns. ;11rd villas;('%. ('%rn
IIN1101 all inctuxiot; amount of retail triode is
cmtrir -1 on in more motlem shops and department
sfon Gro% :th in hoitsiog mod tr mportation has
lmt;t;ed IN�lrind growth in GNP. Nevertheless. over
the pmst divad motlern roads. railroads. mid air
.cox ics�s l..iv4, lm�rt1 provide -1, ;tit(] the number and
epiality 111 home. bave Im�c it improved. As the gov-
ernment inrn roses its efforts to extend the benefits
of itotutnic strou I li to tnr.t) :teas, growth in echt-
t.ififimil, mvilival, mid other st�rvicc% will accelerate.
1. Agriculture. fisheries, and forestry
n. 11:61 crlhuo-
Al;riculture accounts for idwmit 37% of total cm-
ploymrnt and (."tribute% directly to the livelihood
of alNrnt limlf of 1114. populace. Agriculture supplies
mince of Iran's mall lint growing nonoil exports
And play-. an imfrirtant role as it supplier of raw
tn.tieri.tl% to do irik iitimtries, not.ibl%� %agar ;tit(]
textile.. finally. agriculhte i% major c�ustomrr
for pr"m111ct% of domestic industry. %nch as f('rtilizer,
in.ecticid(
tractors. .111d other font imph- nents.
forestry .utd fi%hins; arc of tteuligibIl� importance
its frill) 41y1101nv.
attrmilhiral ot4tpnt fails to meet domestic de-
mands. Although there has been sizable domestic
l�r4mluctiwi. Iran inilunts significant qu;mtitics of
%4,i etable oih and tea and. in recent y :s. wheat.
a% %y( .n 14 sN�r tlnmitities of sugar, milk products,
rice. arid w(m)1. On the other hand. Iran exports
cotton, (nuts ;end nuts, skins, and caviar. Many of
lrati curn�tit agricultural (-xlx)rts file(- intense com-
im�tition in world markets and are suhject to wide
vitiations in prig�. in any event, agricldhtral vx-
iw)rts iery not likely to grow as fast as other exports
Im cams(� of the increasing domestic need for a%4ri-
cuihtr.tl linx11110% �the lwrpulatiun is growing at
3
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A�arey4
M ,a*... -r a -s..
04 4 t
UA
i t
lift I +r".
FIGURE 3. 1MH"bution of GNP (U10U)
i
A"
ttt+n n
tt- rte,+w.wrll
111 (AT. Ne%v basic indnstncs. snc�h as iron and
%144.1 and i>, fhrch('noicals. and nc%v assemll indu
trios ha%e expan(lecl rapidly. 11111 the traditional
in.lnslties �1 'Mile. tnan11factminu. brick pnxl11c�-
lion. etc.-- vinphy the Balk of the i idw trial work
fottc and ptolalrly still acconttt for the major part
of indo.-Mill %aloe addccl.
The setvicrs Bettor Ilia expanded at rout;hl%� the
smolt. tale ;t: o� "tall GNP. %%ith the larews' hiercase
takinst plats� in public admini- tration anti def('nse.
11A11king and insurance have grown at it faster
pate than '..':1', n�flectin;t in part the shift from
it hatter to it now-v etonom% 1lataars, the tradi-
tionml tt 11t, r% of ctirtnnrrce Mid fin.11c�e, still are
fotrd in A11.,1410 Al cities, hwns. ;11rd villas;('%. ('%rn
IIN1101 all inctuxiot; amount of retail triode is
cmtrir -1 on in more motlem shops and department
sfon Gro% :th in hoitsiog mod tr mportation has
lmt;t;ed IN�lrind growth in GNP. Nevertheless. over
the pmst divad motlern roads. railroads. mid air
.cox ics�s l..iv4, lm�rt1 provide -1, ;tit(] the number and
epiality 111 home. bave Im�c it improved. As the gov-
ernment inrn roses its efforts to extend the benefits
of itotutnic strou I li to tnr.t) :teas, growth in echt-
t.ififimil, mvilival, mid other st�rvicc% will accelerate.
1. Agriculture. fisheries, and forestry
n. 11:61 crlhuo-
Al;riculture accounts for idwmit 37% of total cm-
ploymrnt and (."tribute% directly to the livelihood
of alNrnt limlf of 1114. populace. Agriculture supplies
mince of Iran's mall lint growing nonoil exports
And play-. an imfrirtant role as it supplier of raw
tn.tieri.tl% to do irik iitimtries, not.ibl%� %agar ;tit(]
textile.. finally. agriculhte i% major c�ustomrr
for pr"m111ct% of domestic industry. %nch as f('rtilizer,
in.ecticid(
tractors. .111d other font imph- nents.
forestry .utd fi%hins; arc of tteuligibIl� importance
its frill) 41y1101nv.
attrmilhiral ot4tpnt fails to meet domestic de-
mands. Although there has been sizable domestic
l�r4mluctiwi. Iran inilunts significant qu;mtitics of
%4,i etable oih and tea and. in recent y :s. wheat.
a% %y( .n 14 sN�r tlnmitities of sugar, milk products,
rice. arid w(m)1. On the other hand. Iran exports
cotton, (nuts ;end nuts, skins, and caviar. Many of
lrati curn�tit agricultural (-xlx)rts file(- intense com-
im�tition in world markets and are suhject to wide
vitiations in prig�. in any event, agricldhtral vx-
iw)rts iery not likely to grow as fast as other exports
Im cams(� of the increasing domestic need for a%4ri-
cuihtr.tl linx11110% �the lwrpulatiun is growing at
3
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about 3% per year �and the low return on agri-
cultural investment makes allocation of resources
to other sectors of the economy a more desirable
alternative.
Only about 14 of Iran's total land area of 402
million acres is agricultural land Figures 4 and 5)
compared with about 187o for Iraq, 22% for
Afghanistan, and 34% for Turkey. Except for a
narrow coastal plain along the Caspian Sea, the
country is and or semiarid. Agriculture is restricted
to oasis -like patches near sources of water; these
patches are often surrounded by mountains and
vide expanses of wasteland. Rainfall sufficient for
Intensive farming is available only in the heavily
populated "fertile crescent" of the north and west.
In other areas, cultivation is dependent on limited
irrigation or unreliable rainfall. The four agri-
cultural zones established by the 1960 farm census
Figure 6) include: Zone 1, roughly corresponding
to the Caspian Sea plain; Zone 2, the northern and
Grazing
and
Other
Potentially
Cultivable Desert, Waste.
167� 7te or Urban
51% FARMLAND
(55.6 million acres)
Fores
11
land
FIGURE 4. Estimated land utilization (U /OU)
4
central parts of the Zagros mountain range; Zow- 3,
southern and coastal areas; and Zone 4, the plateau.
Most of the agricultural land is in the northern
part of the country, which produces about 60%
of the nation's wheat and barley, 107 of the
cotton, 75% of the tobacco, 80 of the rice and
dried fruits, 90% of the citrus, and 100% of the
tea, jute, and kenaf (a jute -like plant cultivated
for its fiber).
Only about one -third of the agricultural land is
under cultivation in any one year, the remainder
being kept fallow to conserve moisture. Although,
an additional 66 million acres are classified as
potentially cultivable farmland, the possibilities for
actually bringing this land under cultivation are
limited, primarily because of the shortage of water.
Thus, the government planned only a 2% increase
(1.2 million acres) in cultivable land during t1e
Fourth Development Plan March 1968 -March
1973)
At present, only about one- fourth of the agri-
cultural land is irrigated. Except in the case of
the small fertile area on the Caspian and in the
northwest, most crops must be irrigated. Nearly
all of the rice, tree, and vine crops rely on irriga-
tion, as does most of the cotton, sugar beets, and
vegetables. An estimated one -half to two- thirds
of irrigation is by surface water, mainly from
the remainder comes from wells and ghanats, the
ancient Persian system of underground water chan-
nels (Figure 7). These channels consist of gently
sloping tunnels leading from a mother well that Kaps
the water- bearing layer at the base of a mountain to
lower -lying cropland. Some ghanats are as long as 25
miles. Although they are still used extensively, they
are giving way to other forms of irrigation. They
are wasteful, as the water floe's continuously, and
they are susceptible to floods and droughts and
are costly to maintain. About 7,000 ghanats were
in use in 1970, compared with 20,000 in the 1950's,
and the government has not allocated any funds
for new construction or renovation of ghanats.
In order that existing surface water can be used
more effectively, 12 dams have been completed and
another five are in the construction or planning
stage. Several large dams �the Shahbanu Farah
Dam on the Safid Rud north of Tehran Figure 8),
the Aras Dam in Azarbaijan -e Gharbi Province, the
Shah Abbas Kabir Dam in Esfahan Province, the
Mohammad Reza Shah Dam in Khuzestan, and the
Shahnaz Dam in Hamadan �store water for a total
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i
i
Wheat 18%
a
L
0
s
Barley 5%
Permanent
Meadows
Rice 27,
Pastures
Cotton 1
497
Permanent Crops 1�J
Other 37
Fallow
21%..
FIGURE 4. Estimated land utilization (U /OU)
4
central parts of the Zagros mountain range; Zow- 3,
southern and coastal areas; and Zone 4, the plateau.
Most of the agricultural land is in the northern
part of the country, which produces about 60%
of the nation's wheat and barley, 107 of the
cotton, 75% of the tobacco, 80 of the rice and
dried fruits, 90% of the citrus, and 100% of the
tea, jute, and kenaf (a jute -like plant cultivated
for its fiber).
Only about one -third of the agricultural land is
under cultivation in any one year, the remainder
being kept fallow to conserve moisture. Although,
an additional 66 million acres are classified as
potentially cultivable farmland, the possibilities for
actually bringing this land under cultivation are
limited, primarily because of the shortage of water.
Thus, the government planned only a 2% increase
(1.2 million acres) in cultivable land during t1e
Fourth Development Plan March 1968 -March
1973)
At present, only about one- fourth of the agri-
cultural land is irrigated. Except in the case of
the small fertile area on the Caspian and in the
northwest, most crops must be irrigated. Nearly
all of the rice, tree, and vine crops rely on irriga-
tion, as does most of the cotton, sugar beets, and
vegetables. An estimated one -half to two- thirds
of irrigation is by surface water, mainly from
the remainder comes from wells and ghanats, the
ancient Persian system of underground water chan-
nels (Figure 7). These channels consist of gently
sloping tunnels leading from a mother well that Kaps
the water- bearing layer at the base of a mountain to
lower -lying cropland. Some ghanats are as long as 25
miles. Although they are still used extensively, they
are giving way to other forms of irrigation. They
are wasteful, as the water floe's continuously, and
they are susceptible to floods and droughts and
are costly to maintain. About 7,000 ghanats were
in use in 1970, compared with 20,000 in the 1950's,
and the government has not allocated any funds
for new construction or renovation of ghanats.
In order that existing surface water can be used
more effectively, 12 dams have been completed and
another five are in the construction or planning
stage. Several large dams �the Shahbanu Farah
Dam on the Safid Rud north of Tehran Figure 8),
the Aras Dam in Azarbaijan -e Gharbi Province, the
Shah Abbas Kabir Dam in Esfahan Province, the
Mohammad Reza Shah Dam in Khuzestan, and the
Shahnaz Dam in Hamadan �store water for a total
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Zihed
FIGURE 5. Agricultural land distribution (U /OU)
of about 1.4 million acres and provide electric
power for rural development. The most extensive
dam related agricultural project is underway in
Khu -scan, which contains the important Dez,
Karun, and three other rivers as well as the three
major cities, Ahvaz, Abadan, and Khorramshahr.
The development of this region is comparable to the
TVA project in the United States. Storage dams for
irrigation projects on all five rivers are designed
to bring 2.5 million acres of land under irrigation.
The largest single project is the multipurpose Reza
Shah Kabir Dam on the Karun river, started in
August 1970 and expected to be completed within
5 years at a cost of $107 million. This dam alone
v store sufficient water to irrigate 400,000 acres
of farmland. Irrigation projects completed or near-
ing completion under the Fourth Development
Plan ending March 1973) will account for 80%
of the anticipated increase in arable land; the re-
mainder will come from dry farming.
Apart from the effects f increased irrigation,
only minor improvements have been made in over-
all agricultural productivity. Farm practices in gen-
eral have remained primitive. Little attention has
been given to soil preparation, leveling, and plant-
ing, and inadequate use has Seen made of improved
seeds, fertilizer, and insecticides. The use of ma-
chinery in agriculture has increased considerably
during the Fourth Plan. Its impact has been Celt
largely in the farm cooperatives and agrobusinesses
integrated producers and processors of farm com-
modities). The average farmer, who works a small
plot of 2.5 to 12.5 acres, uses primitive techniques
and gets low yields.
Government data on agricultural output imrly
an annual growth rate in output of about 3.7%
during the 1960's. The actual rate was probably
about 3 a record that many developing countries
would envy but short of the 4.47o goal set for the
Fourth Plan.
(1) Land reform The Shah's land reforin
program has been the most important development
in Iranian agriculture in centuries. Launched in
1951 with the distribution of the Shah's own land-
holdings, the program was strongly motivated by
political considerations �the Shah's desire to
broaden the base of his support from a small elite
to a large class of farmers. The program has had
a sweeping effect on Iran's system of land tenure
and farming in general.
R
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Agriculture
Sporadic agriculture
and grazing
Wasteland
Zihed
FIGURE 5. Agricultural land distribution (U /OU)
of about 1.4 million acres and provide electric
power for rural development. The most extensive
dam related agricultural project is underway in
Khu -scan, which contains the important Dez,
Karun, and three other rivers as well as the three
major cities, Ahvaz, Abadan, and Khorramshahr.
The development of this region is comparable to the
TVA project in the United States. Storage dams for
irrigation projects on all five rivers are designed
to bring 2.5 million acres of land under irrigation.
The largest single project is the multipurpose Reza
Shah Kabir Dam on the Karun river, started in
August 1970 and expected to be completed within
5 years at a cost of $107 million. This dam alone
v store sufficient water to irrigate 400,000 acres
of farmland. Irrigation projects completed or near-
ing completion under the Fourth Development
Plan ending March 1973) will account for 80%
of the anticipated increase in arable land; the re-
mainder will come from dry farming.
Apart from the effects f increased irrigation,
only minor improvements have been made in over-
all agricultural productivity. Farm practices in gen-
eral have remained primitive. Little attention has
been given to soil preparation, leveling, and plant-
ing, and inadequate use has Seen made of improved
seeds, fertilizer, and insecticides. The use of ma-
chinery in agriculture has increased considerably
during the Fourth Plan. Its impact has been Celt
largely in the farm cooperatives and agrobusinesses
integrated producers and processors of farm com-
modities). The average farmer, who works a small
plot of 2.5 to 12.5 acres, uses primitive techniques
and gets low yields.
Government data on agricultural output imrly
an annual growth rate in output of about 3.7%
during the 1960's. The actual rate was probably
about 3 a record that many developing countries
would envy but short of the 4.47o goal set for the
Fourth Plan.
(1) Land reform The Shah's land reforin
program has been the most important development
in Iranian agriculture in centuries. Launched in
1951 with the distribution of the Shah's own land-
holdings, the program was strongly motivated by
political considerations �the Shah's desire to
broaden the base of his support from a small elite
to a large class of farmers. The program has had
a sweeping effect on Iran's system of land tenure
and farming in general.
R
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Before the land reform, well over half of th
agricultural land was owned by only 1;;, of the
People, most of whom were absentee landlords;
small holders or peasants owned only 10;: of the
land. Under the landlord tenant system, farmers
handed over 80 of their crops, gave their lalxr
6
fr during the off m-m%on, and frYlolently l) f i l l
"taxis" in kind :n d made "}sifts" to thy Iandbrd.
Lack c, education, by iahh, welfarv. and other gov.
crnn ent servie s kept ti hulk the lwl +ui:�
tion in a state of ln:ui� feudal th- pendency on the
landlord and snbivet to the ,�xaction� of nanr.
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rwuRc o. Agncuiturai zones, 1960 farm census MOU)

lenders tined nniddlenlen for financing and nnarket-
ing crops.
The redistribution of the Shah's land in 1951
and the subseqient Land Reform Law of 1961 -63
were designed to correct econoinic injustice in the
countryside and to bring Iran's illiterate rural ma-
jority into the nnainstreann of national life. The
program was aimed at all of Iran's 50,000 villages
and i vas intended to redistribute both land and
inconne. Land refornn, one of the nine goals of the
NVhite Revolution, was accomplished in three
phases, the final phase ending ill 1971. Under the
first phase, begun in 1962, the governinen` pur-
chase(] 14,534 villages and redistributed the land
among the peasants on the condition that they ac-
cept nlennbershiP in multipurpose agricultural co-
operatives. Peasants were to pay for the land over
a I5 -year period at a price based on the land's cost
to the governinent plus 10'/,.. Although statistics
differ widely, an estimated 600,000 tenant farmers
became lando\vners during the first phase, which
ended in October 1963. The second phase, begun
in Febrtiary 1965, abolished sharecropping and re-
quired farm operators to pay laborers in cash rather
than in kind. hl addition, it linlited land owner-
ship to a nlaXllnitlln of 30 to 200 hectares (74 to
494 acres), depending upon tine location and pro-
ductivity of the land. For land in excess of the
established ceilings, landlords had the option of
selling, dividing, or leasing land to farmers, or
forming joint stock connpanies. More than 90 jo
chose to lease and same 1.1 million peasants thereby
became tenant farmers, setting the stage for the
third phase.
Undcr the "La\v for Distribution and Sale of
Leased Property to Lessee Farmers," passed in
December 1968, the government undertook the
third phase of the laud reform program, which
sought to stimulate agricultiii -al gre\vth through
higher productivity and the gradual replacement of
subsistence fain ers with new, market oriented
agricli1hiral enterprises. A 20 -point program was
developed which ennbraced practically all of the
things needed for agricultural inlprovennent. An
FIGURE 8. The Shanbanu Farah dam,
a buttressed structure across the
Safid Rud in Gilan Province (U /OU)
7
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FIGURE 7. Ghanat system of irrigation. These channels,
used in Iran for centuries, run underground to pre-
vent the evaporation of water. The points at which
water is released along the channels resemble small
craters. (U /OU)

attack on excessive fragmentation of holdings called
for the encouragement of "agrobusinesses" large
private farms styled on those in California, which
process and distribute the products grown) and the
development of joint stock farming corporations
cooperatives in which members contribute land
and equipment in exchange for shares, work on
salaries, and receive corporation profits according
to their shares). The third phase also called for
improvements in the more common form of agricul-
tural cooperative. The number of farm cooperatives
had increased from 711 in 1960 to 8,865 at the end
of 1968, but their function was confined largely to
lending. Hampered by shortages of funds, the co-
operatives generally have not been able to fulfill
the farmer's credit needs. Many farnu�-s have been
forced to pay the usurious rates of private money-
lenders and to sell their products through exploita-
tive middlemen. The Agricultural Bank, which
makes larger loans, caters to the bigger, more
modern farms.
Another major objective of the third phase of
land reform was to stabilize agricultural prices and
to improve marketing and storage. To date, how-
ever, little has been accomplished. The govern-
ment's price policy has been oriented toward con-
trolling farm prices for the benefit of urban con-
sumers, while marketing improvements have been
limited chiefly to the construction of roads.
In summary, land reform to date has been pri-
marily a social and political success, although some
tangible economic gains also have resulted. Those
who cultivate the land now retain a much larger
share of production; productivity has risen; and the
new owners have diversified their product -mix by
producing fruits, vegetables, and other products
formerly forbidden or restricted by landlords. Land
reform, however, has been of little benefit to the
large number of farm workers who are not farm
operators, including large numbers of nomadic
livestock herders. The new landowners, moreover,
are still confronted with credit difficulties despite
the increased numbers of cooperatives.
Land reform has given impetus to other economic
changes which in the long run may have important
benefits. For example, to help finance the land re-
form, the government sold some of its sugar refin-
eries, oil mills, and canning plants to former land-
owners as compensation for confiscated land, thus
broadening the base of Iran's industrial ownership.
F.
2) Government policy �The current policies
toward agriculture, outlined by the Fourth De-
velopment Plan, are intended to carry forward the
aims of the land reform and other measures of the
White Revolution. The plan calls for Iran to pro-
duce sufficient food and raw materials to meet ex-
panding domestic needs and to increase rural
incomes. I:igher farm incomes are to be generated
in part through the implementation of the last phase
of the land reform. Plan goals are to: 1) raise farm
production by ;n average of at least 5% per year;
2) increase farm productivity through improved
technology; 3) create rural employment opportuni-
ties in new cottage industries; 4) conserve, develop,
and better exploit natural resourr-es; and 5) estab-
lish more cooperatives and promote self -help activ-
ities.
Before the start of the Fourth Development Plan
in 1968, a large share of the government's invest-
ment in agriculture iad been directed toward in-
frastructure, land reform, and other activities that
had little immediate effect on productivity. Present
policy gives more emphasis to quick yielding invest-
ments. Priorities have been set to expand production
of commodities such as wheat, rice, oilseeds, sugar
beets, tea, and cotton. The two policies of attract-
ing foreign capital and technology to agriculture
and of leaving the processing industry to private
initiative should give considerable impetus to the
commercialization of Iranian agriculture.
(3) Principal crops The most important crops
grown in Iran are Nvhcat, barley, and rice. About
80% of the land used for crops in any one
year is sown in grain �over half in wheat but in-
cluding also barley and rice Figure 9). The prin-
cipal noncereal crops are sugar beets, cotton, dates,
raisins, oilseeds, tea, and tobacco.
Wheat is by far the most important crop. It is
grown on practically every farm, accounts for
roughly one -third of farm income, and plays the
most prominent role in the average Iranian's diet
about half of caloric intake) Production of wheat
expanded substantially in the crop years 1961/62-
1968/69 (Figure 10) because of increased acreage,
higher yields, and favorable weather. Drought and
other adverse weather factors sharply reduced Iran's
wheat output in the subsequent 3 years.; Output
'Wheat is highly susceptible to weather conditions because
almost two- thirds of it is grown on nonirrigated land.
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A.
Bijlr' 1 Tab
r 7
YatA
i
u I 9shin
N1 7n
E ;fah3q
i i
ermin
,Air7z
BBihehr
.BanAar Abb7s
Wheat
4,000
Barley
_._I
Rice and tea
9
Sugar refining
0
Rug center
c)
Cotton milling
1,046
Northern limit of dates
FIGURE 9. Agriculture and light industry (U /OU)
FIGURE 10. Production of major crops (11 /OU)
(Thousands of metric tons)
1961/62
1965/66
AVERAGE
COMMODITY
Wheat...........
Rice (paddy)
Barley...........
Tobacco.........
Cotton...........
Cottonseed.......
Tea
Sugar, raw
Raisins
Dates............
Apricots, dried....
2,801
766
980
16
117
258
10
189
50
302
9
1966/67 1967/69 1968/69 1969/70 1970/71 1971/72
3,190
4,000
4,400
3,900
3,800
3,000
87:5
954
1,000
1,046
1,13S
1,046
1,000
1,0�1
1,160
1,200
1,200
800
20
22
20
17
18
18
115
118
160
155
150
130
230
233
305
314
305
288
15
18
18
19
19
19
357
424
478
540
566
580
63 45 60 35 60 50
290 280 280 290 310 280
3 7 9 4 12 4
HARVEST SEASON
May-Sept.
Aug.-Nov.
Apr. -Aug.
Ang. -Sept.
Aug. �Oct.
Aug. -Dec.
Sept. -Nov. (sugar
beets)
June -Sept.
Sept. -Oct.
9
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of w1wat in 1917 1 72 (if' :3 million tons was the same
its in 1963 A nct cxpurter of wheat ill 1967/65-
IYis /69. Ir:ul bcc:une it substantial illlportcr in
19711/ 7 1 -19, 1/7�'. Despite inlprove(I weather in
197 Iran's wheat ontpllt c,l :bunt -1 ttlillioll tuns
will fall short of ncc(ls by almilt 5110,000 tolls, whicli
will be illlported. Tile Visited States and Australia
h:ar !,cell the leading suppliers of wheat to Iran.
Barley. which has r)ut',hly the s:uuc geographic
distribution as wheat, is Icss illlportant to Iran's
food supply :old is less affeetcd by adverse weather
l�oa(litiolls. Orltpllt increased at till. rate of alum
3.0'; yearly in 1962/63 19711/71. 011MIL01 barley
nnnrrtll� has bccu expnrtt'd. the decline in output
in 1971 /72 manic Iran i t net importer. Only about
15 of the barley is u,msnnlcd by b.1li lls. the re-
mainder is used principally as :utinlal feed.
Rice is an important and rapidly expanding food
crap. It is the principal item of fond ill till� Caspia11
l o.St;tl region Fi g ure 11 and is important in the
diet of well -to -do Iranians. Oltpnt has risen sharply
silu�c World \1' ;lr 11 and ill 1971/ 72 was (�stimatco.1 to
I)(. I.() tnillirnt tolls paddy Increases in rice nntpnt
!lave stemmed l :lrg from inlpr(wcd yields,
brought about by the introduction of nevy ,trains
of rice and improved cultivation practices. I)espit(�
the itiurcascs ill output. Iran remains a net importer
10
of rice. Irllports in recent years have amounted to
roughly 10 of consumption.
COttoll is the most important cash crop and ac-
cuutS lot� r,11L111)� one f�iftll of nonpetroleunl cx-
Iwrts by v:duc. Production and exports fluctuate in
1 to weather conditions, insect infestation,
and world prices. Ism� example, in 1966/67 file
cotton crop fell sharply because of bollworm infcs-
tation, and export earnings were further reduced by
it decline ill world prices for cotton. In 1071/72,
farmers responded to high world prices by ill-
(.1- cotton acreage by 12.5 to 500,000 acres,
but (I�y weather cut yic:ds sharply, allrd total o(lt-
put was only 1:30,000 tons, compared with 150,000
tons in 1970/71. Yields of Iranian cotton in the past
tended to he low because farm prac�ticcs have been
generally inferior and br_allse about half of the
crop was grown in nunirrigatc(I areas. This situa-
tiol is changing, however, and improved yields
are being realized with the i�Itrnductioll of new
varieties of disease- resistant and cariv matrll ing cot-
ton varieties, and the diversion of irrigated lands
to cotton.
Sol 11.1(1 1 rI its� apricots, dates, raisins, and
c�ih�ns �are crops that have expanded rapidly in
receut years and that have good potential for further
expansion. Sugar output has risen ;.�adily to an
estimated 550,(1(10 tons in 1971/72. Output� lum -cyer,
continues to lag behind consumption, which was
abort 620,000 tons in 1971/72. Fruits and nuts are
\yell sllite(I for growth in Iran. 'These crops rant:
second, b value, in agricultural exports. Because
a large nulllbcr of trees hate been planted since the
start of land reforin. output and export of fruits and
nuts should c�ol timle to expand fairly rapi(i;".
Iran is one of three major world
pro(lnccrs ()f licit opium, the other two being
111(ha all(I toe IT.S.S.R. (Turkey also was a major
producer prior to the government ball on opium
production in 1972. Cultivation of opirinl poppies
in Iran dates back hundreds of years, and the
c�ouutry was a leading world producer and ex-
porter of o1)ium when the Shah imposed a hall on
output in The hall rename(! in effect for
11 years. llnring this perio(1 the Iranian Govern-
ment was frustrated by its inability to preycrlt
imports of illicit narcotics from neighboring cot"'-
tries. its attendant loss of foreign exchange. and its
still large population of addicts. Early in 1969.
the Shall rcinstitnted legal production of opium to
supply the llee(ls of addicts \\-]to registered with
the gnycrnn cut. At the sank time. Iran announce(!
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FIGURE 11. Rice paddies in northern Iran WOU)

FIGURE 12. Opium poppy cultivation by administrative
area (C)
that it would again stop production when cultiva-
tion had been eliminated in the neighboring court
tries Turkey, Afghanistan, and Pakistan.
Cultivation of opium poppies has been expanded
from 2,538 acres in 1959 to an estimated 60,000
acres in 1972 and extends to almost every province
(Figure 12). Since the resu mption of prodnetion,
output has risen rapidly, as follows (in metric tons
of processed opium):
1969
8
1970
/d H
1971.
156 (e%1.
5
217 (est.)
7'
(2
*TEHRAN sEMNAN
(1
pN pOpJ TEHRAN
M
(41 (8%) (6
KHORASA -N
'2
s9y-0
(23%)
AN
(8L I E$(16
ti
c
(31%) suteriurIIfA
'.HUZ.EST.1N AMMlfu
(�A
AOYER AHMADI-YE
J
SARDSIR VA
KOHKILUYEH
KERMAN
FARS
(13%)
(10%)
I Z
=Considerable
eALucr+EST4N
I
SAHELi YE
VA SiSTAN
Moderate
R VA
AAG BAN E
=Insignificant 1. KHA1.i/
E FARS
VA DARYA YE 'OMAN
Percent of total cultivation
in parenthesis
501691 3 -73
FIGURE 12. Opium poppy cultivation by administrative
area (C)
that it would again stop production when cultiva-
tion had been eliminated in the neighboring court
tries Turkey, Afghanistan, and Pakistan.
Cultivation of opium poppies has been expanded
from 2,538 acres in 1959 to an estimated 60,000
acres in 1972 and extends to almost every province
(Figure 12). Since the resu mption of prodnetion,
output has risen rapidly, as follows (in metric tons
of processed opium):
1969
8
1970
78
1971.
156 (e%1.
1972
217 (est.)
Average yields of harvested opium have increased
from 8.8 pounds per acre in 1969 to more than 13
pounds in 1970/72. The 9;/c-12//' morphine content
of Iranian opium compares favorably with the con-
tent of Indian opium.
Opium is cultivated by licensed farm coopera-
tives, private farm corporations, and individual
farmers. Poppies are normally planted in the fall
and in Nlar -11 and are harvested as one crop in May
and une. Growers are required to sell their total
crop to the government, which prc rides on -site in-
spections during the harvesting period and trans-
ports the opium gum under guard to government
warehouses. Diversion to illegal channels also is
limited by self policing among members of coopera-
tives, sine^ violations by one member would result
in the dc. action of all poppy fields in the coopera-
tive. To date, the government has reported de-
tecting and destroying only about 2 acres of
illicitly cultivated poppies each year.
High earnings from legal poppy cultivation tend
to deter farmers from illicit activities. The govern-
ment pays farmcis an average of about $65 per
kilogram for opium gum, considerably higher than
the illicit price at the border, but less than in
11
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Tehran and other places in the interior. From the
cultivation of 2% acres of poppies, a farmer can
gross about $975 per year, considerably more than
the verage fanner earns.
Domestic production accommodates the needs of
Tan's registered narcotics users estimated at
105,000 in mid -1972. However, the more numerous
nonregistered opium and heroin users demand large
illegal imports of as much as 195 tonb a year. Be-
cause of the expansion of the government program
of registering narcotics users and the imposition of
tighter controls on the Turkish border, illicit im-
ports have been declining. Most illicit traffic now
enters from Afghanistan; small amounts also enter
from Pakistan and possibly from other countries
via the Persian Gulf. Foreign exchange losses to
Iran from the illicit opium trade may amount to
about $8 million annually, assuming payments of
about $40,000 per ton.
Illicit traffic continues despite the severe penal-
ties meted out to offenders. Under the 1969 law, the
death penalty is possible for the possession of more
than 2 kilograms of opium or 10 grams of heroin,
morphine, or cocaine. By 1972, Iran had executed a
total of 133 offenders, many of whom are believed
to have been Afghans.
(5) Livestock Livestock and livestock prod-
ucts account for roughly one -third of total agri-
cultural output and involve about one -tenth of
the working population. In addition to being an
important source of food, livestock provide raw
materials for local processing industries, including
the world- renowned wool carpet industry. Farm
animals also provide power and transport for the
farmer.
The livestock inventory Figure 13) has shown
little increase over the years. One reason is that
about 807c of the livestock are in migratory flocks
which graze on badly depleted rangeland; they
suffer from food shortages, disease, and poor breed-
ing, and are highly susceptible to drought or cold.
In a bad year, such as 1961 or 1963, large numbers
of animals die of starvation or cold or are slaugh-
tered for food. The annual migrations also take their
toll of animals.
Output of meat and dairy products has risen, but
well below the rate needed to meet Iran's expand-
ing food needs. The country is chronically short of
meat, and, as in 1972, shortages are reflected in
rising prices. Mutton and goat are the most im-
12
FIGURE 13. Livestock population (U /OU)
(Thousands of head)
1970 /71
1961 /62 (ESTIMATED)
Sheep
32,000
:10,000
Goats
12.500
13,000
Cows.
6,000
6,000
Donkeys
2,000
2.100
Camels
500
400
Horses and mules...........
600
6100
Rater buffalo
200
25:1
Pigs
7 5 5
50
Po
24,000
35'000
portant meats produced. Government loans are
used to spur animal husbandry and the growth of
feed grains. Although meat is the major food prod-
uct of animal origin consumed, dairy products are
the most important in terms of value of output.
Because of the shortage of refrigeration, more than
half of the dairy products cc_.. tned in Iran are in
the form of cheese or yogurt. Output of meat and
dairy products will likely cantinue to fall short of
demand in the foreseeable future.
h. fisheries
Although Iran borders oil the Caspian Sea, the
Persian Gulf, and the Oman Guif, fishing is of
minor economic importance. The fish catch, esti-
mated at about 22,000 metric tons annually, is only
a fraction of 1% of GIMP and is insignificant irr
terms of food intake. In the waters of the Caspian
and its tributaries, there are ;,Ie 85 species of fish,
the most important of which is tine famous caviar
bearing sturgeon Figure 14). Iranian output and
exports of caviar increased by an average: of 3' 4
yearly during the 1960'x, amounting to soma 200 toes
in 1970 /71. Exports of caviar, valued at about $5
million or 1.4`,% of nonpetroleum exports in 1971/72,
were principally to the U.S.S.R. and the United
States. The government -owned Iran Fisheries Com-
pany, formed in 1953 when the Irano-Sovict Fishing
Company was nationalized, controls t catching,
processing, and marketing of sturgeon and caviar.
Thc: company has also undertaken fish breeding
operations Figure 15) in an effort to counteract a
decline in sturgeon population caused by the con-
struction of hydroelectric powerplants on the Volga
River �the main spawning ground �and pollu-
tion of Caspian waters_
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it
W-
i
The Persian Gulf and the Oman Gulf contain
abiindant supplies of shrimp and some 150 edible
species of fissi. In addition to shrimp, cone niercially
important products include tuna, Spanish mackerel,
ar sardines. Annual shrimp catches are Usually
bet%yeen 4,000 and 5,000 tons, and exports of frozen
shrimp have become important to the areas of the
gulfs. The potential for the Persian Gulf fishing
industry appears good; a survey by Japanese experts
estimated that it could earn $200 million per year
for Iran. Fishing operations in the Persian Gulf
and the Oman Gulf are controlled by the govern-
FIGURE 14. Sturgeon fishing on
the Caspian. These seiners stake
the nets a few miles offshore to
trap fish heading upstream to
spawn. (U /OU)
ment's Southern Fisheries Company, -which operate-
15 tra%ylers and one shrimp freezing ship as yell
as cold storage areas in Bandar Abbas and Khor-
ramshahr and some 10 refrigerated trucks. Tm
foreign companies operate in the gulfs under con-
cession from Iran: Gulf Fisheries of Kunyait and
British Ross Persian Gulf Seafood Company.
r�. I rrxl r!
Althongh the forest area comprises about 11%.
(45 million acres) of Iran's land, it is of minor
economic significance. Only about 9 million acres
FIGURE 15. Ten million fish can be
bred annually in fish farms such
as this one south of Rasht, which
is operated by the Iran Fisheries
Company (U /OU)
13
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FIGURE 16. Iran's oil and gasfields and pipelines (U /OU)
are worlKed commercially; these are mainly in the
Caspian area. All other forested areas produce only
fuehvood and lumber for local use in construction
and as railroad ties. Iran is self sufficient in fuel
wood and in primary industrial wood products,
but is a net importer of processed wood products.
2. Fuels and power
a. Petroleum
Rich petroleum resources (Figure 16) have placed
Iran In the forefront of world oil exporters and have
played a vital role in national economic develop
rnc 'nt. Output In 1971 was a b out 1.7 billion barrels,
or roughly 10`1i; of world output, making Iran the
14
second largest Middle East producer Figure 17).
During the 1960's. Iran's production grc%v at an
average annual rate of almost 14`�:'� eonsiderah1y
faster than the 3'; for the world as a vyhole and the
10',; for the diddle East.
Iran's petroleum. output is expected to increase
sharply and could amotmt to 9.0 million barrels
per day by 1930. At present rates of extraction,
Iran's rusvi vcs� c'stinrlted at 65 billion barrels
would last about 40 years; however, if grovyth in
extraction were to continue at recent rates, the
reserves would last only 21 years. These reserves
are the third largest in the Middle East follo
those of Saudi Arabia and Kuwait), and they con-
stitute about 10 of the estimated world total.
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i
TURKEY Er�S�ti.R.
U. S, S.
CASPIAN
V
V an j z +.�ti'\ e rahnr
I�
Astara
J
e ;a'i he
Rasht
a5
Qazvin
a e Mashhad
Shahnrd
i
TE RAN
e
Sernnan
Rey
Hamadan
Kermanshah
Nalt�e
AFGHANISTAN'
Shah
'Arak KAshAn
KhorramabAde
B AGHDAD
Esfaha
IRAQ
r
e
Masied Soleym n
Yazd
)'edam,, .�A
0
`saran
NEUTRAL
A h
Man Sha c
a Kerman
yy-
ZONE N WoA j e '74"
l
Shiraz
2ahedan
KUWAIT a _d*1AIIREH�YE
,n.
SAUDI ARABIA
KHARK
I +,q 1:1%TAN
IRAN
y
tta Oilfield
Gosfield
Oil pipeline
K- Refined products
l i IAIIREH�YE
Bandar'Abbase,
pipeline
Gas pipeline
1 1, IAVAN
A Oil refinery
Tanker terminal
1 IIAIIIIAIN
X
0 50 100 150 N..-
0 50 100 150 200 K..m !a,
;l`: \TAN
J
Tli l'l I: \1. l; I r r n l
�TArl,s r r
FIGURE 16. Iran's oil and gasfields and pipelines (U /OU)
are worlKed commercially; these are mainly in the
Caspian area. All other forested areas produce only
fuehvood and lumber for local use in construction
and as railroad ties. Iran is self sufficient in fuel
wood and in primary industrial wood products,
but is a net importer of processed wood products.
2. Fuels and power
a. Petroleum
Rich petroleum resources (Figure 16) have placed
Iran In the forefront of world oil exporters and have
played a vital role in national economic develop
rnc 'nt. Output In 1971 was a b out 1.7 billion barrels,
or roughly 10`1i; of world output, making Iran the
14
second largest Middle East producer Figure 17).
During the 1960's. Iran's production grc%v at an
average annual rate of almost 14`�:'� eonsiderah1y
faster than the 3'; for the world as a vyhole and the
10',; for the diddle East.
Iran's petroleum. output is expected to increase
sharply and could amotmt to 9.0 million barrels
per day by 1930. At present rates of extraction,
Iran's rusvi vcs� c'stinrlted at 65 billion barrels
would last about 40 years; however, if grovyth in
extraction were to continue at recent rates, the
reserves would last only 21 years. These reserves
are the third largest in the Middle East follo
those of Saudi Arabia and Kuwait), and they con-
stitute about 10 of the estimated world total.
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The share of CN1' accounted for by the petroleum
industry increased from 9.4',; in 1959/60 to about
17',; in 1969/70. in 1971/72 the petroleum industry
hevaniv the leading productive sector apart from
services) accounting For about 23';; of ;NI'. Ex-
ports of petroleum and petroleum products supply
about 85';; of Iran's foreign exchange earnings and
about 60', of its budgetary revenues. Revenues
from the petroleum sector have risen as follows:
Iran'c oil and gas fueled the etcrnai fires of the
Zoroastrians, but it was not until the late 19th
centnry that serious attention was paid to com-
mercial exploitation of these resources. Iran has
maintained continuous commercial production of
oil since 191� and is the oldest producer in the
Middle East. The hulk of commercial output tip
to 1951 was procinced by the Anglo- Iranian Oil
Company (now Briti.sh Petroleum Company), which
FIGURE 17. Crude oil production (U /OU)
(Millions of barrels)
operated in in area of 65 million acres in south-
west Iran tender it concession agreement concluded
in 1933. After several years of unsuccessful nego-
tiations on revision of the 1933 agreements, Iran
nationalized the petroleum industry in 1951 and
formed the National Iranian Oil Company (NIOC)
with sole proprietary rights over the country's hy-
drocarbon reserves. Anglo- Iranian Oil Company
ceased operations and production fell to a low
level during; 1952 -54.
In October 1954, the government signed an agree-
ment with a consortium of international oil com-
panies Figure 18) to exploit Iran's resources. Since
then the consortium has produced roughly 907r,
of Iran's petroleum. The 1954 agreement %vas for
25 years with provision for three 5 -year extensions,
aril gave exclusive rights to exploration, drilling,
refining, and transportation in an area covering
100,000 square miles reduced in 1966 to 75,000
square miles) adjoining the Persian Gulf. Outside
the consortium area, oil operations Lovering some
27 districts are handled by NIOC, which has en-
couraged the development of 50/50 partnership
arrangements with foreign companies. As of 1972,
10 foreign companies %were in partnership with
NIOC and two were operating under contract
to NIOC. Only four partners -SIRIP (Irano-
Italian Petroleum Company), LAPCO (Lavan Pe-
troleum Company), IMTNOCO (Iranian Marine
National Oil Company), and AMOCO Amoco Iran
Oil Company, formerly Iran Pan American Oil
Company -IPAC) -have been successful in find-
MILLION% or
iIIAMAV vEAR
U.S. nOLUUGi
1959/80
335
1980/01
.3739
1961/62
392
1962/63
4:37
190,3/04
471
1904 /05
556
1985/80
8117
1908/07
710
1987/08
857
1988/09
958
1969/70
1,183
1970/71
1.290
1971/72
2,231 preliminary
Iran'c oil and gas fueled the etcrnai fires of the
Zoroastrians, but it was not until the late 19th
centnry that serious attention was paid to com-
mercial exploitation of these resources. Iran has
maintained continuous commercial production of
oil since 191� and is the oldest producer in the
Middle East. The hulk of commercial output tip
to 1951 was procinced by the Anglo- Iranian Oil
Company (now Briti.sh Petroleum Company), which
FIGURE 17. Crude oil production (U /OU)
(Millions of barrels)
operated in in area of 65 million acres in south-
west Iran tender it concession agreement concluded
in 1933. After several years of unsuccessful nego-
tiations on revision of the 1933 agreements, Iran
nationalized the petroleum industry in 1951 and
formed the National Iranian Oil Company (NIOC)
with sole proprietary rights over the country's hy-
drocarbon reserves. Anglo- Iranian Oil Company
ceased operations and production fell to a low
level during; 1952 -54.
In October 1954, the government signed an agree-
ment with a consortium of international oil com-
panies Figure 18) to exploit Iran's resources. Since
then the consortium has produced roughly 907r,
of Iran's petroleum. The 1954 agreement %vas for
25 years with provision for three 5 -year extensions,
aril gave exclusive rights to exploration, drilling,
refining, and transportation in an area covering
100,000 square miles reduced in 1966 to 75,000
square miles) adjoining the Persian Gulf. Outside
the consortium area, oil operations Lovering some
27 districts are handled by NIOC, which has en-
couraged the development of 50/50 partnership
arrangements with foreign companies. As of 1972,
10 foreign companies %were in partnership with
NIOC and two were operating under contract
to NIOC. Only four partners -SIRIP (Irano-
Italian Petroleum Company), LAPCO (Lavan Pe-
troleum Company), IMTNOCO (Iranian Marine
National Oil Company), and AMOCO Amoco Iran
Oil Company, formerly Iran Pan American Oil
Company -IPAC) -have been successful in find-
no Datit not available.
15
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I\ PERCENT OF:
Middle
OTHER
World
1 w;t
CONAORT1CN
NiOC
COMPANIES
TOTAL
flutput
Mitln,9
1960........
:3%2.2
2.5
no
:354.7
4.8
20
1961
427.5
5.3
1.3
4:34.1
5.1
21
1!11,1.....
474.9
4.5
2.4
4`1.8
6.2
22
1913:3..........
527.'1
5.�1
5.eI
53s.I
6.4
22
1913.4
6305.4
2..;
10.2
61`:.:3
6.8
22
19135
63.3!1.!)
2.,A
25 .6
6SS.3
6.0
23
19636
7:36.2
3.1
.12.0
771.3
6.1
23
1!167
9110.:3
3.
44.1
947.63
7.0
26
196
9x7,0
:3.:3
46.7
1.037.0
7.1
2�
IW9
1, 1:11.!)
:3.3
M).7
1.231.9
i i
2:
19711
1.2713. 1
:3.6
117.11
1.397. fis
8.0
28
1971
1,512.:3
4.4
135.�1
1,63.35.:3
q. 'j
28
no Datit not available.
15
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ing and producing commercial quantities of petro-
leum, principally from offshore fields. Ontput by
the NIOC and the four joint companies Las risen
sharply and in the next several years will make
up a greater proportion of Iran's total output.
Iran's financial arrangements with foreign oil
companies have been negotiated astntely by the
Shah and his representatives, resulting in increas-
ingly favorable returns to Iran. The initial 1954
agreement with the consortium, as amended in
1964, guaranteed Iran 56.25`yo of the profits from
operations as taxes and royalties, based on an
artificial "posted price" for crude petroleum ex-
ports. Since most sales were made at prices sub-
stantially below posted prices, Iran's share of actnal
profits under the 1964 agreement came close to 70%
of the total. Posted prices remained practically un-
changed between 1964 and 1970, but minor adjnst-
ments were made in the agrecaient whereby gov-
ernment revenues were increased by abort YXi
Two agreements in 1970 and 1971 fundamentally
altered the financial arrangements between the
Iranian Government and the consortium. On 14
PARENT
COMPANIES
British Compagnie
Petroleum Froncoise des
Company Ltd. Petroles
I U. K.) (France)
November 1970 the income tax on the consortium's
net profits was raised from 50'( to 55" and tlfe
posted price for Iranian heavy crude oil (account-
ing for about 45'%. of consortitim revenue) was in-
creased by 5.5'/ resulting in a 12; overall increase
in government revenues per barrel of oil. In Feb-
ruary 1971 Iran led other Persian Gulf members
of OPEC (Organization of Petroleum Exporting
Countries) in a lucrative ant] far reaching (1971/
75) settlement with the international oil companies
of the region. As it applied to Iran, the agreement
affirmed the tax-rate increase of November 1970,
provided an immediate increase of 21`, in the
posted price on which taxes are based, and stipu-
lated annual increases in the posted price of 2.5`i;.
during 1971/75 to offset worldwide inflation. All
additional 5 cents per barrel \vas provided for on
1 June 1971 and on the first of each year during
1973 /75. The February 1971 agreement raised Iran's
revenue per barrel of exported petroleum by an
average of 9.5`% yearly during 1971/5.
Iran, together with other Persian Gulf members
of OPEC, on 20 January 1872 negotiated further
Mobil I I Srandar�! Oil I I Stondard Oil
Oil Company Company iN.J.) o! California
(U �A.) (U.5.A.) (U.S.A.)
Royal Dutch
Shell (U.K.-
Netherlands)
Gulf Oil I I I Texaco, Inc.
Corporation (U.S.A.I
(U.S.A.)
SUBSIDIARY
COMPANIES Iricon CONSORTIUM TRADING: COMPANIES
Agency, Ltd.'
(U.S.A.)
40% 5% 6% 14% 7 0 /0 7 M 7,
Iranian Oil Participants Ltd.
(Holding Company)
OPERATING
COMPANIES Iraonse Aardolie Exploratie en
Iraonse Aardolie Raffinage Mij. Producne Mij.
(Iranian Oil Refining Co.) (Iranian Oil Exploration and
Producing Co.)
Iricon Agency, Ltd. acts as a common agent in matters relating to the Consortium
for its parent companies
FIGURE 18. Oil companies operating in the consortium (U /OU)
16
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increases in petroleum revenues to offset the higher
costs of imports caused by August 1971 changes
in world currencies. Iran demanded and received
an adjustment to compensate for the increased costs
of imports from countries that revalued their cur-
rencies against the dollar notably Japan and most
Western European nations. The 1971 and 1972
agreements, coupled with anticipated increases in
petroleum exports, are expected to yield an esti-
mated $14 billion in revenues during 1971/72
through 1975 /76- triple those received by Iran
during the preceding 5 years. Discussions with the
consortium for farther increases in revenues were
underway in early 1973.
The scope of NIOC's activities is increasing and
probably will include the sale of refined products
on the international market. Previously, NIOC ex-
ported only crude petroleum in limited quantities
from its 50 entitlements in joint- venture offshore
fields about 220,000 barrels daily) and from its
barter -oil arrangement with the consortium about
43,000 barrels daily). Internationalization of NIOC's
efforts also has included a 13% participation in a
refinery in India (Madras), which became opera-
tional in July 1969, and a 17.57c share in a South
African refinery that is under construction. These
refineries and others currently considered for ex-
pansion or construction in Belgium, Yugoslavia and
Spain will provide outlets for NIOC export.:,. In
March 1972, NIOC announced that it was taking
steps to develop a sizable tanker fleet, including
supertankers, for direct transport of oil and petro-
chemical products to world markets. NIOC has also
undertaken with British Petroleum a joint venture
for oil exploitation in the North Sea.
The bulk of Iran's petroleum output is exported,
principally in crude form. Exports of crude petro-
leum increased by an average of 14.5 o annually
since 1960 and reached 4.3 million barrels per day
in 1971, making Iran the world's second ranking
exporter. Japan and Western Europe together ac-
counted for about three- fourths of Iran's petroleum
exports in 1970 (Figure 19). Iran is Japan's leading
supplier of petroleum, a reflection of the magnitude
of Japanese energy requirements, but more particu-
larly of the utility of blending Iranian medium
sulfur crudes with crudes from other countries to
produce a grade satisfactory for Japanese industries.
Prospects are good for continued expansion in sales
to Japan and to Western Europe as the latter's sup-
plies from Libya decline and as delivery from ex-
panded port facilities at Kharg Island via super-
tankers becomes available.
Exports of refined products have risen, and
domestic refining capacity is being expanded to
meet both domestic and export demands. Iran has
six refineries Figure 20) with a total capacity of
about 673,000 barrels per day, as shown below:
Abadan 466,000
Tehran 100.000
Dfasjed Soleymaii 78,J00
Kermanshah (2 refineries) 15,000
15,000
Naft -e shah 5,300
Domestic consumption has risen an average of
127o per year and currently amounts to about
360,000 barrels daily. Export demand, supplied
largely by the Abadan refinery, has also risen. Iran,
therefore, is doubling the capacity of the Tehran
refinery, erecting several new refineries, planning
additional ones. A 40,000 barrel- per -day refinery is
to be completed in February 1973 at Shiraz, and
contracts have been signed for a 20,000- barrel -per-
day plant on Jazireh -ye Lavan Lavan Island)
Probably the most significant addition to Iran's re-
fining capacity, however, will be the facility which
FIGURE 19. Direction of petroleum exports (U /OU)
(Percent of total)
1960 1965 1966 1967 1968 1969 1970
Western Europe..........
47.0
60.2
42.2
41.0
30.4
25.2
24.9
Japan
3.0
22.1
31.1
37.4
42.1
46.9
49.7
Asia (excluding Japan).
15.0
8.2
9.3
9.2
14.2
13.4
11.9
Africa
17.0
8.6
6.8
6.6
7.9
10.9
9.9
Noi th America...........
8.0
8.7
7.5
3.6
3.8
3.0
2-1;
South America...........
0.0
0.4
0.6
0.5
0.0
0.0
0.1
Australia
5.0
1.8
2.5
1.7
1.6
0.6
0.6
Other regions.............
5.0
0.0
0.0
0.0
0.0
0.0
0.6
Total
100.0
100.0
100.0
100.0
100.0
100.0
100.0
17
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i
Avg Y
p
FIGURE 20. The Tehran oil refinery (U /OU)
the consortium will build at Kharg Island, the capac-
ity of which may reach 300,000 to 360,000 barrels
per day.
b. Natural
Iran ranks third in the world in gas reserves, fol-
lowing the U.S.S.R. and the United States. The
voluric of its reserves is conservatively estimated at
200 trillion cubic feet. The major gasfields are the
Khangiran field at Sarakhs in northeast Iran, with
18 trillion cubic feet, and Pazanan field in the con-
sortium area, with 50 trillion cubic feet. Output of
natural gas, largely in conjunction with the procicc-
tion of crude petroleum, totaled about 1,245 bil-
lion cubic feet in 1971, increasing an average rate
of about 16% yearly since �1965. Although most of
the gas continues to be flared, recovery and con-
sumption have been rising and accounted for an
estimated 407c of output in 1971, compared with
less than 107o 3 years before. Gas has supplied an
increasing share of Iran's rising energy require-
ments, accounting for about 147c of the total in 1969
and replacing to some extent petroleum products,
which have a higher export value. Petroleum and
gas together provide about 877c of domestic energy.
It has been estimated that Iran's domestic ccn-
sumption of gas will total some 212 billion cubic
feet by 1980.
The National Iranian Gas Company (NIGC a
wholly -owned subsidiary of NIOC, is in charge of
18
the distribution and sale of natural and refinery gas
in Iran. NI(:C, formcd ill 1966, operates a nunbvr
of gas pipelines and is responsible for the L�:uiau
Gas Trunkline IG 1' which began operations ill
1970 and is still being expanded by NIOC. Tic
major I(:AT clencnt is a 687 -mile line, extendi ig
from the southern oilfields to the U.S.S.R. border,
the first stage of Nvhich was completed in 1971. Tllc
second stage will include construction of a booster
station, more compressor stations, and another
gathering line. In 1971, the line delivered about
198.5 billion cubic meters of gas valued :;t $37
million to the L' S.R., in payment for tic economic
and military er, dits that Iran has received from the
U.S.S.R. These credits include $77 million to finance
part of the foreign exchange cost of building the
trunkline to the Soviet border. Under the agreement
with the U.S.S.R., Iran will expand deliveries to
353.2 billion cubic feet annually by 1974 and pro-
vide a total of about 5,000 billion cubic feet of gas
by 1955. The IGAT pipeline, scheduled for con-
pletion in 1974, ��ill have spur lines to major cities
including Shiraz, Esfahan, Kashan, Qon. Tehran,
and Qazvin. Petrochemical projects at Khark
(Kharg) Island, Abadan, Bandar -c Shahpur, and
Shiraz use natural gas as a major input: gas is also
used as a fuel at the steel plant in Esfahan. In addi-
tion to the existing supplies of gas, NIOC has dis-
covered gas fields in the Sarajch area, near Ker-
manshah,and near Mashhad.
Production of liquefied natural gas LNG is
undergoing expansion to accommodate the export
demand, largely by Japan. in 1971, large scale out-
put of LNG was confined to the consortium-oper-
atcd Abadan refinery (which delivered 184 barrels
per clay of LNG to the NIOC and .associated com-
panies) and to the consortium's four NGL natural
gas liquids) plants in the fields at Agha Jari and
Martini. I late 1972, new plants at Kharg Island,
Bushehr, and Qcshm, involving a total investment
of some $3 billion, were under active consideration,
%vith foreign firms to hold a 50`,' interest. The
Kharg Island and Qeshm projects are intended to
supply Japan, and the Bushehr project has a large
American shareholding and will send most of its
production to the United States.
C. 1-3rc�tric power
Production of electricity has increased by about
18',% annually since 1964 and generally is adequate
to meet present requirements. Total installed capa-
city in 1971 was 2.8 million kilowatts (kw.), and
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runual production was an estimated 8.3 billion
kilowatt -hours (k%vAir. slightly less than 341;(, of
capacity. More than i0f of national cap.;::ity is in
thermal plants using petroleum and natural gas as
fuel; 1ydrocicetric plants account for the remainder.
The Tehran area uses 43/ of the annual produc-
tion; another 24;"; is used by the Abadan -Ahvaz
area,
and Esfahan, Shiraz, Tabriz, and Mashhad
consume approximately 13' of the national total.
Scattered towns and villages consume the remain-
ing 20`,-<
Industry accounts for about 65;i, of national con-
sumption, principally in petroleum rc`ining, and in
textile, cement, and sugar production. Households
consume about 15;,; of available electricity, and
commercial use, public services, and agriculture
account for the remainder. The per capita consump-
tion in early 1971 was 250 kw. -hr.
The country's largest thermal power generating
stations are in Tehran and in the AL�adan -Ahvaz
area. These include the 312,000 -kw. Shahriar and
the 247,000 -ktv. Farahabad plants in Tehran and
the 152,000 -k%v. Abadan powerplant. Other princi-
pal thermal stations are the 75,000 -kw. Tarasht
(Alsthonu) powerplant in Tehran, the 47,000 -k\v.
Shahabad station in Esfahan, the 42,000 -kw. power
plant in Tabriz, and the 30,000 -kw. plant in Mash-
had. The largest hydroelectric powerplant is the
520,000 -kw. Dcz station, north of Alivaz. Three
smaller hydroelectric plants are located in the vicin-
ity of Tehran: the 84,000 -kw. Karaj plant, the
70,000 -kw. Manjil plant, and the 22,000 -kw. Leyta
plant. A 1,000,000 -kw. hydroelectric station (tile
Reza Shah Kabir) is under construction in Khur_c-
stan. Generating plants in the rest of the country
consist of a number of gas turbines 8,000 to 17,000
kw.) and several hundred diesel and small steam
units. The aggregate capacity of these small sta-
tions is about 30% of the national total.
Electricity is transmitted by an extensive inter-
connected 230- kilovolt (kv.) system to two princ%-
pal areas. One part of the system consists of almost
300 miles about 480 kilometers) of 230 -kv. trans-
mission lines supplying Abadan, Ahvaz, and the
nearby petroleum fields from the Dcz hydroelectric
station. The other part of the system is in the north
and consists of about 454 miles 732 kilometers) of
230 -kv. lines which connect the Manjil, Karaj, and
Leyta hydroelectric powerplants with the thermal
generating installations in Tehran. Both systems
have lines transmitting 230, 132, 66, and 33 kilovolts
and are interconnected by about 432 miles 696
kilometers) of 230 -kv. lines. Lines 63 kilovolts and
above total almost 3,000 miles (4,707 kilometers).
The electric power industry evolved during the
1960's from small municipally or privately owned
Power companies and generating plants associated
with industries. In 1965, the electric power industry
was nationalized, and by 1967 most of the country's
installed generating capacity except captive in-
dustrial generating facilities �teas under the juris-
diction of the ;\linistry of Water and Power. Ten
regional electric companies were established to
generate and distribute electric power throughout
the country. In 1969, the Iranian Electric
Power Generation and 'Transmission Company
TAVANIR) was established; it assumed owner-
ship and operation of all major generating stations
and transmission facilities (132 kv. and higher).
TAVANIR sell bulk power and energy to large in-
dustrial installations 5,000 k\v. or more) and to
the 10 regional electric companies for resale through
their respective distribution systems. These com-
panies distribute power at 11, 20, 33, and 66 kv.,
as well as 220/380 volts.
Generating equipment and transmission facilities
were imported, while powerplants and transmission
lines were built by both foreign and local contrac-
tors. Skilled manpower is scarce, and engineers and
technical advisers are mostly foreigners.
Demand for electric power is expected to reach
12 billion kw. -hr. by the end of the Fourth Plan
(March 1973). Per capita consumption is expected
to rise to about 400 kw.-hr.-60% more than in
early 1971. Iran is attempting to cope with this ex-
panding power demand by making more effective
Ilse of existing facilities and by installing additional
capacity. Electric power capacity at the end of the
Fourth Plan is expected to amount to 3.1 million
kw. Several large powerplants are being built for
companies affiliated with the Ministry of Water and
Power in Tehran, Gilan, Klnuzestan, Khorasan,
Esfahan, Fars, and Kerman with an additional ca-
pacity of 1,270,000 kw. In addition to these, 82
smaller towns not connected to the national power
grid will be equipped with diesel generator sets. Ex-
pansion of the transmission network will add a large
number of towns and villages to the national grid.
d. Solid fuels
Solid fuels �coal, charcoal, wood, and animal
dung �form a small and declining share of Iran's
fuel consumption. In 1969, they accounted for only
19
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7 y'i, of total fuel constfmption as opposed to !91 in
1960. The decline in their importance stems from
the demand for more efficient fuels petroleum
and natural gas �by Iran's expanding modern in-
dustry and urban centers. Among the solid fuels,
only coal is expected to increase in demand through
the mid- 1970's, mainly because of the newly com-
pleted stc:l mill's requirements for coking coal.
Iran's output of coal increased slightly during
the 1960's to about 323,000 tons in 1970/71. The
principal consumers of coal have been the textile
plants, foundries, brick and other kilns, rural public
baths, and households that use coal for cooking and
heating. Although precise data are not available,
production rose considerably in 1971/72 in part be-
cause of demand for coking coal for Iran's new steel
mill at Esfahan. The first stage of the mill became
operational in 1972 and will consume about 600.000
tons of coal annually. The potential for expanded
output of coal is substantial. Dposits in the Ker-
man area and in the Elburz motintains are esti-
mated at over 100 million tons. Deposits also have
been found in Khorasan and in the Azarbaijan
provinces.
Charcoal, wood and animal dung are of lesser
importance as solid fuels in Iran, but production
statistics arc not available. \lost of the fuelwood cut
is converted into charcoal, usually in small, primi-
tive facilities.
3. Nletals and minerals
Geological investigations and discoveries to date
suggest that Iran has a great potential for mineral
production, besides the hydrocarbons. Although
only 1`,4 of the area has been surveyed, sizable
deposits of copper have been found in the Kerman
area, iron ore at Shanisabad and Bafq, chromite in
smithwest Iran, and lead -Line ores and sulfur along
the Persian Gulf at several inland sites Figure 21).
Other identified deposits include bauxite, tungsten,
manganese, nickel, cobalt, antimony, tin, uranium,
and kaolin. Building materials, such as chalk,
marble, sand, and granite, are abundant throughout
the country. The government retains ownership of
all mineral resources except those used in btiilding
construction, which belong to individual property
owners. Nfining operations and concessions are
governed by the \filling 1_1w of 1958. According to
Coalfield
Lead and zinc deposit
steel mill complex
Iron ore deposit
Machine tool pl nt
Copper deposit
Oil refining
Chromde deposit
C Astira�
Tabriz
Rasht�
Gazvin. r S hah -d
Mashhad�
Tehrin
erminshih Pb; Zn
F
ak lk Gom
Cu
jishin
.Andimeshk Esfahan
Aghi AT
Gachsii
501689 3.73
FIGURE 21. Mining (nonoil) and heavy industry (U /OU)
20
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FIGURE 22. Production of major metals and minerals (U /OU)
(Metric tons)
coMM oarr)�
Metals:
Chromium urc (C1:203 cou-
tent)
Copper ore (Cu content)
Iron ore We content)....
Lead ore (Pb
Jlan9anese ore (Jlu (*on-
tent)
Zinc (Z11 content)
Nonmetals:
Salt.......
Sulfur
na Data not available.
1962/63 19(i3/(i4 1964 19U:i/(i( 1966 67
1967/(.~
49,900
5,000
3
5,200
47,00()
(;1.1)00
07,:;00
67,;)00
72,000
72,000
2,000
0
titiOO
9,(i
25 060
�)2
10'000
lU, (160
1,00(1
10, 6 W
I,O ()U
1 ,1100
1,000
I 1 700
1.1,70()
]4d,00
2,10()
7,500
5, 900
10, 000
12,200
1:3,90(
15, 600
1(1,()00
15,000
1
17,00
24,000
19ri. /(it) 19(il1,; 70 197o/71
1 1:3, 300
1:35 tiUO
12,00()
12, 00t)
1 000
2 OOO
15,00o
24 0011
10, 500
8" Soo
25 060
�)2
_166,000 216 ,000 2:. VU
1:;,000 26,000 39,000 _'40,00() 2.1:;,000 2.19,000 324,0('0 3.17,000
20,0 060 25, 600 24, 000 na
3(, OO()
1.15, loo
na
2, ()U(1
23,000
8,400
na
3( ;s, 0()0
ha
the mining census of 1963, there were 1,024 mines
employing a total of over 15,000 workers; the nuns_ gas Although the plant is not as technically ac]_
ber of mines and miners has i ncreased considerabl Danced as some Western plants, the Iranians plan
since 1963, but precise data are not available y to expand its capacity from 600,000 tons of pig
made
b
Exploitation of Iran's mineral resources other wouldr satin f to 1.9 million tons by 1975, which
than hydrocarbons has been concentrated on lead of Iran's requirements. Provisions hav
y all but an estimated 100,000 tons
and zinc ores, chromite, and raw materials for con- to produce
struction (Figure 22). Income from nunul g steel beams, angles, c hannels, and pro
tieshas been reported at less than 1 of G, b a b ut i files which Iran currently imports. In 1972, Iran
is rising. production of lead and
zinc ores increasccl modern s te e l c of a secon ore
sharply between 1962/63 and 1970/71, mainly from West Germany and others werc a from
the large depsits in the Kavir desert.
chromium ore doubled b d i 196
1970/71, Out ut of er review.
p The most interesting development in the mining
7/68 nd industry is the planned exploitation when it totaled about 145,000 tons chro-
of the large
mium oxide content or roughly wo rld c opper deposits at Sar Cheshmeh in the Kerman
Put. Exports of Inlneral ores-principally load, area of southeastern Iran, estimated to cont
cromite, and zinc -have increased bu t only million ton averaging of ore avera gin aII 300
Y 1972, the g 2Jo copper. By mid
amounted to about $20 million, or 7 jo of total non- 1972, had completed surveys and
petroleum exports in 1971/72, had contracted witll the Anaconda Company of
Output and exports of metals and minerals other tile T3 ntt e d StateSl es
or C1i finical services. The gov-
than hydrocarbons should increase appreciably in Company estimates that investor ent in copper ex_
hmeh Copper )fining
the near future, largely as an outgrowth of de- ploitation will be over $400 mil lion, and produc
velopments underway in the iron and copper Indus_
tries. Recent discoveries of iron tion will amount to about 160
ore have increased Burin the first 7 00 tons annually
known reserves to several hundred tons t g years of operation, scheduled cgn in
and have coincided with the increased demand for sale of tonsran already has made a advance
ore by Iran's expanding steel incltcstr of copper to Belgium and West
Bard mine in the Bafq area alone is reported to have 1 arts of Sar ex
pe that the total value of ex-
sucient deposits to supply for 25 to 50 ears the eshmch copper could amount to
ffi
ore needs of the Aryemahr steel mil] located about
40 miles copper ]cpos'ts
southwest of Esfahan. Construction of nelude t Other huge
west of Kerman, estimated t
o have mines sove uth
the mill was started in 1958 with equipment and Q arl mines, with
tons of copper, ford the t h v over 3
technical assistance provided by the U.S.S.R. ]n)(ler more than 3.5 million ton 1 million
a $286 million .12�-year credit repayable in ni,,,,ral san regiol,. ]s an 'others in the Klioi*
21
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4. Mantifacttiring and construction
Mantifacturing is one of the most dynamic sec-
tors of the Iranian economy. In the 1960'x, the
value added by n rose at a greater
rate than GNP as a whole and almost as fast as
that of the hetrol(.tun industry, accounting for about
15`'; of GNJ in 1971/72. One of the Shah's major
objectives is to build np manufacturing to reduce
the economy's dependence on oil.
Industries developed since the 1930's include
petrochemicals, cotton and woolen textiles, flour
milling, sugar Figure 23), building materials, tires
and tubes, matches, fruit processing, soap, light
en (rinecring, metal fabrication, and tobacco. In addi-
tion, Ira nian plants assemble automobiles, trucks,
buses, radios, television receivers, refrigerators, and
stoves. Production o1 selected n I'll ill factured items is
shown in Figurc 2.1. Side b side' with its ne'w indus-
tries, Iran has we -old cottage industries producing
textiles, carpets, bricks, terra cotta, and silver ob-
jects. Tlwse cottage industries Figurc 25), manned
by skilled artisans, still account for the major part
Of the industrial nlanpowcr and probably contribute
a significant share of value added in ntanufacturing.
Until the early 1960's the government led in
:ndt:strial investment because few private investors
were willing to risk large investments in Iran.
The government bought factories from the U.S.S.R.
and Eastern Enrope in exchange for pctroleurn and
gas. Public investment in industry plays an ex-
tremely large role in basic industry and in the hydro-
carbons, but foreign investors have been enticed
into Iran by the expanding demands of an enierg-
ing n)odcrn sector nd by investment incentives
provided by the government. New factories have
bec:) built mainly in the industrial centers of Te-
hran, Ahvaz, Esfahan, Tabriz, and the Caspian
Sea areas.
Private investment in Iran has concentrated on
assembly -type operations and the. production of
constnrter goods for a number of reasons: the
capital costs were relatively low, the government
gave preferential treatment to major imported
inputs, and a market was assured by heavy protec-
tive tariffs on imports of competitiv finished goods.
High profits have been made by new factories
30'; reportedly is a normal pretax profit rate,
and a 5 -year tax holiday is not ttnconnnon.
FIGURE 24. Productic n of selected manufactured items (U /OU)
ITEM UNITS 19(35/(16 1966'67 1967 /6S 196 1969/70 1470/71
Passenger e;trs
1,000 units......
2.2
2.:;
8.6
20.3
2x.:3
:30.0
Commercial vehicles..........
1,000 units......
6.3
(i.4
7.5
9.4
9.:3
14.4
Tires
1,000 units......
202
2S5
320
900
1,130
1,219
Sugar
1,000 tuns.......
242
356
-1r:7
40S
540
060
Cotton yarn
1,100 tuns.......
44.2
:10.7
51.0
6S.0
70.1
71.0
Tobacco products............
'Millions of units..
9, 6169
10,122
10,632
11 1.1.1
12,104
11 "9S
Radios and phonographs......
1,000 units......
92
106
1:30
134
1661
17.1
Fertilizers (nitrogenous).......
1,000 tons.......
l: ;.S
2:).0
25.4
2:3.0
26.1
2S.2
Televisions
1,000 units......
7
9
29
-57.0
75.8
120.2
Refrigerators
1,000 units......
na
na
na
1.13.3
166.R
177.9
Cement
1,000 tons.......
1,417
1,53.5
1,517
2,000
2,342
2,577
Pol -I chloride............
1,000 tons.......
0
0
0
0
0
11.:3
Caustic Soda
1,000 tons.......
0
0
0
0
0
15.9
Paper
1,000 tons.......
0
0
0
0
0
9.3
*OperatinnS began in 1471
22
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FIGURE 23. A sugar refinery in Shiraz (U /OU)

Government policy now encourages development
of industry that will deepen the industrial process,
use domestic resources, and create additional ex-
ports. According to the broad licensing criteria,
applications by new firms r ust show that the im-
port content of their proposed products will be
no more than 357 of the product's value or that
the domestic value added will be at least 357 of
the product's total value. A new firm may be
obliged to commit a fixed portion of its output
to export markets. These regulations apparently
are sufficiently flexible and profit expectancies are
still large enough to ensure continued investment
in manufacturing in Iran.
The government's efforts to broaden the indus-
trial base of the country have apparently met with
some success. In 1967/68 the output of finished
goods accounted for 65 of total industrial output.
comprising 46 nondurable consumer goods, 187
durable consumer goods, anc only l,c identified as
capital goods Figure 26). The remaining 35 1 ,:'r
consisted of intermediate goods for further use in
industry or construction. Although the production
of capital goods rose much more rapidly than that
of any other branch of industry, the sector was
still comparatively small in 1971/72.
Because of the heavy investments associated with
large, resource -based industries, the government
has played a major role in the development of
those industries. In addition to the steel mill, the
government has invested over $300 million in four
major petrochemical plants, about $170 million in
two machine factories, $83 million in a tractor
plant, and $50 million in an aluminum plant. For-
eign loans and supplier credits also were used for
these projects.
In an effort to promote regional development
and alleviate problems of urban congestion, the
government has practically stopped issuing invest-
ment permits for the Tehran and Esfahan areas.
The private sector is encouraged to invest in satel-
lite plants around the basic industries, e.g., steel,
aluminum, petrochemicals.
The government has taken steps to solve the
problems of a shortage of development capital and
of technical and management personnel. Funds
have been increased for the government -owned In-
dustrial Credit Bank of Iran (ICBI) and the quasi
official Industrial and Mining Development Bank
of Iran (INIDBI Nonetheless, smaller firms still
find it difficult to obtain medium and long -term
loans and working capital. The ;Ministry of Econ-
oiny has initiated a training program for man-
agers and technicians, conducted on the job and
in schools. The shortage of highly skilled workers
persists, however, and hampers Iran's industrial
expansion.
FIGURE 26. Index of industrial production by commodity groups (U /OU)
(1967/68=100)
WEIGHTS 190S/69 1969/70 1970/71
Nondurable consumer floods
46
119
130
1.19
Durnble consumer goods
1s
122
136
1 �S1
Nonconstruction intermediary Roods...........
24
103
10S
113
Intermediary goods for construction............
11
107
141
139
Capital goods
1
144
153
250
Total index
100
114
127
1.11
23
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FIGURE 25. Stamping galam -kars (sheets or covers made
of cotton with colored patterns) in Esfahan (U /OU)

The construction sector has contributed to and
benefited from Iran's rapid economic development.
In the 7 years ended in 1971 /72, value added
in the construction sector at constant prices grew
by an average of 10c7c yearly and accounted for
somewhat over 4 of GNP. Public construction
about 63 of the total �has grown faster than
private construction because of the expanding gov-
ernment programs for building housing, roads, air-
fields, telecomm�nications, hospitals, and schools.
Iran produces an increasing share of its con-
struction materials. Imports of building materials
in 1970/71 were valued at $145.8 million, down
57c from the previous year. Imports of cement,
however, continue to grow despite an 827c increase
in domestic output between 1965/66 and 1970/71.
In 1971/72, Iran's cement imports roughly doubled
in value to an estimated $15.4 million.
5. Domestic trade
Domestic trade is growing rapidly under the
stimulus of an increasing population, expanding
purchasing power, and rising demands of the mod-
ern urban sector. In the 2 years ending in 1970/71,
wholesale and retail sales adjusted for price in-
creases) rose by about 9170 annually, or roughly
the same rate as GNP. Value added by trade,
however, increased at a slower rate, and it de-
clined as a share of GNP to almost 7 in 1970/71.
The decline in the ratio of value added to value
of sales during the period in part reflects the ap-
pearance of more efficient and more competitive
enterprises in the trade field. In 1966, there were
an estimated 6,000 wholesale and 79,000 retail es-
tablishments the numbers have grown considerably
since then. Registered commercial companies in-
creased in number from 5,800 in 1960 to 14,700 in
1970.
Despite some modernizing, the basic structure
of retail trade remains primitive by Western stand-
ards. The majority of retail establishments are
small, privately owned, and usually operated by
the owner. Large numbers of street vendors (Fig-
ure 27) and itinerant peddlers are found in all
urban areas, and the traditional bazaar remains
an important part of the urban scene. Although
the number of large retail businesses catering to
the modern urban sector is increasing, notably in
Tehran, only 3.2 of the retail businesses in 1966
were owned by joint stock companies.
Wholesale trade practices are similar to those
in the West. The principal canters of wholesale
24
distribution are Tehran and the large provincial
capitals. An estimated 63' of the goods in domestic
trade are produced or assembled in Iran. In Tehran,
however, imported goods comprise over half of all
merchandise sold.
Most wholesale and retail business is conducted
on a cash basis, but credit sales are increasing,
despite the high interest rates, which range from
7 on 3 -month credit to 29% on 12 -month credit.
Installment buying is finding acceptance, particu-
larly in the urban areas. According to one survey,
the volume of durable goods purchased on install-
ment increased by 2VC' in 1969/70.
The government is active in domestic trade
through regulation of imports and attempts to
influence prices as well as through government
directed trading organizations. The government
also operates outlets for goods produced in its
handicraft shops and has stimulated the develop-
ment of sales cooperatives. Under the 1962 revision
of the Commercial Code, the government 0 i- elates
the operation of businesses, commissioi, ,gents,
and brokers.
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FIGURE 27. Fruitsellers at the entrance to the bazaar
in Esfahan (U /OU)

D. Economic policy and development (C)
1. Policy
a. Role of government
The government exerts considerable influence
on economic activity in general and economic policy
in particular. The Shah has the final word in the
determination of economic, as well as all other
national policies. In the two decades following
1941, when the Shah mounted the throne, foreign
governments, foreign oil companies, and strong
political groups within Iran severely circumscribed
the Shah's capacity to act. Now, however, the Shah
confidently outlines policies, with massive petroleum
resources under government ownership and the
economy surging ahead. A host of government
organizations advise the Shah and implement his
decisions; among the more important ones are the
Plan and Budget Organization, the Ministry of
Economy, the Ministry of Finance, and operating
units such as the National Iranian Oil Company.
The Shah also elicits economic advice from private
individuals and international groups, such as the
United Nations and the International Bank for Re-
construction and Development (IBRD or World
Bank)
The Shah's economic objectives are to modernize
and develop the Iranian economy to a point where
it is capable of sustained growth and of providing
a standard of living equal to that of Western na-
tions. Land reform, education, and improvement
of mass communications are basic to the Shah's
program. With the same aims, the Shah is encour-
aging foreign participation in industrial develop-
ment through tax concessions, import protection,
and profit repatriation guarantees.
Broad coordinated fiscal and monetary policy
generally has been lacking, except for the series
of stringent fiscal and monetary controls imposed
in the late 1950's to combat severe inflation. Al-
though still strongly attached to the goals of price
stability, the government's moves to control prices
are largely through import and monetary policies
and direct controls rather than fiscal restraint.
b. Fiscal policy
Government fiscal operations have had an in-
creasing impact on the Iranian economy. During
the 5 years ending March 1971, government expend-
itures increased from about 217o to an estimated
297o of GNP at current prices, and public sector
investment expenditures increased from 42% to
over 507c of total investments. The strongly ex-
pansionary budget was accompanied by increas-
ingly large deficits financed mainly by the domes-
tic banking system and by large -scale external
borrowing.
Despite major improvements in budgetary pro-
cedures and presentation of financial accounts in
recent years, comprehensive data on public sector
financing are not available. In particular, informa-
tion is inadequate concerning the operations of
municipalities, government enterprises, and inde-
pendent agencies. The discussion of the budget,
therefore, is limited to the two major public sector
budgets, the budget of the Treasury General the
ordinary budget) and of the Plan Organization
development budget) These are combined in the
government budget figures shown in Figure 28.
Government revenue increased at an average an-
nual rate of 13% during the 5 years ending March
1971. About half derived from the petroleum in-
dustry. Government revenue from sources other
than oil increased at an average annual rate of
about 16 during those 5 years. As a percentage of
GNP, nonoil revenues increased from about 9` /v in
1965/66 to about 11`/v in 1970/71, the increase re-
flecting growth in the economy, improvements in
tax administration, and new revenue measures. Be-
cause receipts from petroleum are so large, the level
of other taxation is still relatively low in Iran. in-
direct taxes accounted for over half of nonoil
revenue in 1970/71, with customs duties being the
most important. The growth in customs revenues,
however, has lagged behind the growth in imports
because an increasing share of imports is duty free.
Other important sources of indirect taxes include
the central bank's foreign exchange operations and
taxes on locally marketed fuel and petroleum prod-
ucts. Revenues from government monopolies and
other agencies have increased slowly but have
declined as a percentage of the total.
Revenue from direct taxes accounted for less
than 37o of GNP and only about 12` /o of total
revenue in 1966/67. The new income tax law that
vent into effect the following year, together with
improvements in tax assessments and collections,
nearly doubled direct tax revenues in the 3 years
ending March 1.971. Despite the tax exemptions on
small landholding and the generally weak agricul-
tural income tax, revenues from personal income
taxes have risen more rapidly than those on corpora-
25
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FIGURE 28. Government finance (U /OU)
(Billions of Iranian rials)
Revenue
Oil
Nonoil
Direct taxes
Indir;;ct .taxes
Other
Current expenditures
Surplus on current operations
Investment expenditure
1965/66 19661/617 1967/68 196S /611 1909/70 1970/71
91.3
99.2
107.3
127.4
143.0
171.4
50.0
47.4
54.0
61.8
70.1
83.8
41 .:3
:51 S
:5:3.3
65.6
72.9
S7.6
10.7
11 .9
14.0
17.:5
21.1
2fi.5
20.2
26.2
25.2
3:5.1
38.
44.S
10.4
1:3.7
11.1
1:3.0
1:3.2
16.3
61.7
70.5
52.1
95.5
114.4
134.4
29.6
25.7
2:5.'2
25.6
25.6
37.0
37.0
37.9
54.0
70.1
53.0
97.9
Overall deficit 7.4
Fin ancing of deficit:
Net utilization of foreign loans 0.1
Net utilization of consortium advances...... 0.0
Net utilization of banking system.......... 6.1
Net utilization of sale of Treasury bills and
bonds 2.0
Net utilization of other sources -0.8
na Data not available.
tions. Receipts from government services have in-
creased slowly and form a minor share of total
government revenue.
Government expenditures rose an average of 197c
yearly during the 5 years ending March 1971
Figure 29). Current expenditures formed the
largest share of government spending, about 587o
in 1970/71. The major factor behind the increase in
current spending has been the expanded military
buildup. Defense expenditures rose by an average
of 22 annually in the 5 -year period- considerably
FIGURE 29. Government expenditures (U /OU)
(Billions of Iranian rials)
9.2 28.8 41.:5 :54.4 60.
2 .5
S. 6
22.:5
21.2
19.:3
0.0
0.0
0.0
6.3
1.7
5.5
12.8
11.1
17.4
:33.13
:5.4
7.4
7.7
S.0
5.0
-4.2
0.0
0.2
1.5
1.3
1971/72
(DRAt-r
BIuGE�r)
2-11.S
137.11
104.2
na
na
na
I6S.9
72.9
1311.0
63.
4.1.9
18.2
na
na
faster than any other major sector -and accounted
for 477c of Total current expenditures in 1970/71.
In addition to purchases of military equipment, the
Shah has increased the size of his military forces
and raised the pay of military personnel. Spending
on social and economic services health, education,
etc.) increased by an average of 137c, yearly but
fell from more than 40% of total current expendi-
tures in 1965/66 to roughly 33/0 of the total in
1970 /71. Administrative and other current expendi-
tures increased by an average of 16"'r' yearly as
1965 /66 to
1970/71
AVEItAGE
1970171 1971/72 ANNUM.
(EBTi- (DRAFT INCREASE
1965/66 1966/67 1967/68 1965/69 1969/70 MATED) BUDGET) (YERCE \T)
Current expenditure:
Defense and security........
Social and economic Services..
Other
Total
Investment expenditure........
Total expenditure
24.0
27.2
35.7
43.4
51.:5
62.5
52.3
81.2
24.6
25.3
31.2
35.7
40.7
44.7
49.7
12.E
13.1
15.0
15.2
19.7
22.2
261.9
311.9
15.5
61.7
70.5
52.1
9S.S
114.4
134.4
165.9
16.8
37.0
37.9
54.0
70.1
53.0
97.9
136.0
21.5
95.7
105.4
136.1
165.1
197.4
232.3
30.1.9
18.7
W
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the result of the creation of new ninistries, the up-
grading of positions and salaries of civil servants,
and the rise of interest paynents on the external
public debt.
Although investment expenditures have increased
considerably, notably in the 3 years ending March
1969, they generally have fallen short of the budget
plan. In the 2 years ending Marclt 1971, the rata of
growth of investment expenditure slowed clown be-
cause of budgetary difficulties and the closer scru-
tiny of investment projects, especially those fi-
nanced by foreign loans. In addition, many of the
large projects started in earlier periods neared com-
pletion in 1970/71. The distribution of public de-
velopment cxpendittn�cs by main economic sectors
for the Third and Fourth Dcvelopnunt Plans is
shown in Figure 30.
During the Fourth Plan (1968 -73), fnvestnunt
priorities were shifted slightly in the direction of
industry and mining, and less emphasis was given
to social infrastructure, housing, and construction.
Special priority was placed on the expansion of
capacity in basic industries-iron and steel, alturti-
num, and petrochemicals -for which foundations
were laid ciuring the Third Plan. The private sector
was to provide most of the investment for consumer
goods industries. Agricultural investment was to
promote expansion in the number of cooperatives,
assist in developing agroindustry, and finance in-
vestment in production of fertilizer, insecticides,
and other related inputs. The share of fiwestmcnt
going into transportation and comtnunication was
to decline slightly from that of the Third Plan,
when large projects were initiated in tciccontrtnnti-
cations and road building.
Tltc Fifth Dcwclopntcnt Plan (March 1973
March 1975), according; to preliminary reports, calls
for the GNP to increase by 11.4/, annually, or at
roughly the rate maintained since the mid 1960'x.
Lvestinents of $32.5 billion are to be tnorc than
doable those in the Fourth Development Plan,
With the government providing 62' of the total.
The largest share of investment is to go to social
\welfare -a marked departure from previous spend-
ing. The second largest share is to go to agriculture,
where emphasis is being placed on expanding the
supply of credits and technological services.
Since 1965/66, surpluses on current government
operations have not been sufficient to cover the
heavy investments made by the government; over-
all deficits rose over 700'5 to about 61 million rials
in 1970/71. The major portion of the deficit was
financed by domestic borro\ving, largely througli
the banking system. During the 6 years ending in
March 1971, net utilization of foreign loans
amounted to about 74 billion vials (roughly US$1
billion) and financed about 37`c of the cunrtilative
deficit during the period.
c�. Rankin, atcl tcrrtelartl pnlic�11
The central bank in Iran is the Bank Markazi; it
issues currency, ser\'cs as the go\ycrnnient bank, and
regulates the activities of the commercial banks.
In addition to the central bank, and some 20 com-
mercial banks, Iran has five specialized credit in-
stitutions -thc Industrial and Mining Devclopmcnt
FIGURE 30. Government developmental expenditures, Third and Fourth Development
Plans (U /OU)
*Colunul does not add became of rounding.
27
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THIRD PLAN SEPTEMBER 1911:3-
FOURTH PLAN
MARCH 196S-
\t.t1tc'R
INS
11173
Billion
Billion
Iranian
Iranian
sF CTOR
vial.
Percentage
rink
Percentage
Agriculhtre and irrigation..
49.0
21.13
113.5
21.8
Industry and mining......
28.6
12. i
09.0
19.1
Fnels and potter........
36.5
15.:+
S9.3
17.2
Transportation and couununi-
cations
5 9..i
25.9
113.::
21.9
C;onstrnct ion and honsing..
12.4
2:3.0
4.4
Education and health.....
31.6
Id.7
4S.1
9.y
Other
12.4
:;.4
31.1
6.0
"Total
2:30.0
100.0
:i1 S.0
1 100.0
*Colunul does not add became of rounding.
27
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Bank of Iran (I`IDBI the Industrial Credit Bank
of Iran, the Agricultural Cooperative Bank, the
Mortgage Bank, and the Agricultural Development
Fund of Iran (ADFI). All but the IIvIDBI and
ADFI are government owned. The I`IDBI, estah-
lislied in 1959 with government assistance and
foreign participation, lends priniarily to larger in-
dustrial enterprises. The ADFI, established in 1968,
supports the development of commercial agricul-
ture. Both institutions receive technical and fi-
nancial asistance from the IRRD. Credit to the
public sector by the specialized banks nearly
doubled between \March 1967 and Decen 1971.
Lending by commercial banks is generally ori-
ented toward the traditional role of financing
donnestic and foreign trade. Small- and medium
sized industries and farmers generally suffer from
a shortage of working capital and inadequate ac-
cess to bank credit. Efforts to broaden the capital
market in Iran have inet with only limited success.
The Tehran Stock Exchange has not figured prom-
inently in the sale of industrial securities but rather
has engaged primarily in selling national and local
government bonds. This situation should change;
according to a government. announcement in Sep-
tember 1972, 86 major enterprises have agreed to
sell up to 49/0 of their shares in the public as part
of a program of increased worker ownership in
industry.
Insurance plays only a minor part in the develop-
ment of capital, and most people prefer to save in
commercial banks rather than through insurance.
Total insurance receipts in Iran equal less than 1%
of national income, compared to 107c in the United
Kingdom.
F-iGUP