Iran sits on a tenth of the world's proven oil reserves
Iran holds about 10% of the planet's proven oil and 15% of its gas, enough for commentators to call it an energy superpower. Yet since 1979 its economy has lurched through slow growth, high inflation and sanctions. The story of that paradox stretches back to Persian gold coins and a royal road 2,857 km long.
Commerce in the region is ancient. After defeating Croesus of Lydia in 546 BC, the Persians made gold their principal coinage metal. By around 475 BC the Royal Road linked Susa to Smyrna on the Aegean. Modern agriculture dates from the 1850s, when the reformer Amir Kabir imported improved seeds and signed foreign cooperation deals, and the Imperial Bank of Persia opened in 1885.
Reza Shah Pahlavi, ruling from 1925 to 1941, built infrastructure, reformed law and education, and introduced modern industry. Under his son, oil money and foreign aid fuelled rapid state-led growth between 1954 and 1960, followed by inflation and a weaker rial. The 1970s oil surge flooded Iran with capital, but prosperity clustered among urban elites while land reform pushed poor rural migrants into city slums. Those marginalised migrants, called the Mostazafin, became the backbone of the protests that toppled the monarchy.
After the 1979 revolution, nationalisation and the eight-year war with Iraq put over 80% of the economy under state control; the war cost Iran some $500 billion. Akbar Hashemi Rafsanjani then pushed privatisation, free-trade zones and an end to price controls, but runaway spending brought inflation, riots in 1992 and 1994 and a debt crisis. Mohammad Khatami unified exchange rates, created an Oil Stabilization Fund and licensed the first private banks since the revolution, though conservatives blocked cuts to energy subsidies.
Mahmoud Ahmadinejad rode a commodities boom with lavish credit and spending, while China became Iran's largest import source after the UAE. Today the country of over 90 million people has a large public sector, subsidised energy, low rankings for ease of doing business and a rial that has lost much of its value since the 2010s, with sanctions tied to its nuclear programme deterring investment.
Source: Economy of Iran
