An Iranian government plan to set a higher budget oil price for next year will cut contributions to a petrodollar fund and may be opposed by parliament, a leading lawmaker was quoted on Thursday as saying.
Any cash earned from crude sales above the budget price are automatically transferred into the Oil Stabilisation Fund (OSF), set up for investment or to support the budget in times of need.
Under the plan, the new budget, which starts in March 2007, would set the oil price at $45 a barrel, $5 above this year's level although well below current market prices.
Even with buoyant oil prices, the government has tapped the reserves to fund current spending, drawing criticism from economists who say it fuels inflation. But the government needs parliament's approval to withdraw funds from the OSF.
"The government should not set the oil price at $45 per barrel in the next year's budget because it will leave the Oil Stabilisation Fund empty," Kamal Daneshyar, the head of parliament's energy committee, was quoted as saying.
"We will not permit the government to set the oil price at more than $40 in the next year's budget since it would put the country's economy into crisis," he was quoted as saying by the Iranian economic daily Donya-ye Eqtesad.
Iran's 290-seat parliament is dominated by the Abadgaran faction, which backed Mahmoud Ahmadinejad's successful presidential bid last year and his promises to spread out wealth more fairly in the world's fourth largest oil producer. But MPs have not always given him an easy ride.
Last year, three of his proposals for oil minister were blocked and, this year, he has come in for criticism about sharply rising prices, even from members of Abadgaran.
Inflation reached 14.6 percent in September. Daneshyar, who is not a member of Abadgaran, could not immediately be reached for comment. One Iranian official said the government might be forced to back down over the price proposal. Iranian crude tends to sell for about $7 below US crude, which was trading around $59 on Thursday. But it is still selling for well above $45.
Daneshyar said the government may not like the idea that if funds are put in the OSF it would "have to beg" parliament to use them, the newspaper reported. Daneshyar's comments were originally made to an Iranian news agency.
But he said: "If the extra oil income is put in the Oil Stabilisation Fund, the government and the parliament can decide, after holding meetings, to allocate cash from this fund to various projects."
Even Iran's central bank has in recent months joined in criticism of the government for dipping into the OSF. "Conversion of foreign exchange resources of the OSF into rials does not favour the economy," Governor Ebrahim Sheibany said in a speech in May, carried on the central bank Web site (www.cbi.ir). "Conversion of excess revenues to rials will result in inflation and socio-economic imbalances," he said.
In May, the central bank said dollar reserves had plunged to $10.5 billion in March from $16.4 billion in January after allocations for gasoline and other budget items. Despite plentiful crude reserves, Iran has to import some of its gasoline needs because it does not have enough refining capacity to meet domestic demand.