Roger Stern on Iran

The U.S. case against Iran is based on Iran’s deceptions regarding nuclear weapons development. This case is buttressed by assertions that a state so petroleum-rich cannot need nuclear power topreserve exports, as Iran claims. The U.S. infers, therefore, that Iran’s entire nuclear technology program must pertain to weapons development. However, some industry analysts project an Irani oilexport decline [e.g., Clark JR (2005) Oil Gas J 103(18):34–39]. If sucha decline is occurring, Iran’s claim to need nuclear power could begenuine. Because Iran’s government relies on monopoly proceedsfrom oil exports for most revenue, it could become politicallyvulnerable if exports decline. Here, we survey the political economyof Irani petroleum for evidence of this decline. We define Iran’s export decline rate (edr) as its summed rates of depletion and domestic demand growth, which we find equals 10–12%. We estimate marginal cost per barrel for additions to Irani production capacity, from which we derive the ‘‘standstill’’ investment required to offset edr. We then compare the standstill investment to actual investment, which has been inadequate to offset edr. Even if a relatively optimistic schedule of future capacity addition is met, the ratio of 2011 to 2006 exports will be only 0.40–0.52. A more probable scenario is that, absent some change in Irani policy, this ratio will be 0.33–0.46 with exports declining to zero by 2014–2015. Energy subsidies, hostility to foreign investment, and inef-ficiencies of its state-planned economy underlie Iran’s problem,which has no relation to ‘‘peak oil.’’

http://www.pnas.org/cgi/reprint/104/1/377