Shah on a Shoestring

Not too many months ago, Iran's national production was growing at a dizzying rate of 42% a year. Shah Mohammed Reza Pahlavi seemed to leaf through Aviation Week as if it were his special Sears catalogue. In the councils of the Organization of Petroleum Exporting Countries, Iran took the lead in insisting that the world price of oil should be pushed ever higher.

But then worldwide inflation and recession cut the demand for oil. For the Iranian year that ends March 20, the country's oil revenues will be about $3 billion less than expected. As a result, Iran's $45 billion budget for the coming year projects a deficit of $2.4 billion. Prime Minister Amir Abass Hoveida characterizes that sum as a nachees (Persian peanut), but it will nonetheless be Iran's first deficit in a decade. Last week the government officially announced that it was trimming its price for heavy crude by 9 1/2-c- per bbl., to $11.40, a gesture aimed at increasing Iran's slipping share of the market.

For all the difficulties, Iran still expects economic growth of 17% in the new year (the Iranian year 1355). The government is pressing ahead on industrial-development programs, including the construction of two nuclear-power plants, four steel mills and a mammoth $2 billion petrochemical installation.

Iranians face some unaccustomed stringencies, however. The salaries of civil servants have been frozen. Imports are likely to fall by 40% in the new year.

Residents of Tehran have been told that they themselves, by buying government bonds, will have to put up most of the $1.2 billion needed to build a subway system in the capital.

The Shah's armament-buying spree is becoming more and more of a window-shopping expedition.

Iran recently cut its order for American Spruance-class destroyers from six ships to four. The Shah is also said to be reconsidering his informal decisions to buy the U.S. AW ACS system (a Boeing 707 packed with strategic electronic gear), a new Air Force cargo plane called the YC-15 and 300 F-16 lightweight Air Force fighter planes.

Bizarre Suicide. The government is trying to press Westerners to buy more Iranian oil. Last year, claiming that its profits were being squeezed, the eight-country consortium that buys most of Iran's crude reduced its purchases by 750,000 bbl. a day and turned to cheaper Iraqi, Saudi, and Kuwaiti oil. Premier Hoveida charged the companies with a breach of the 20-year contract with Iran that they signed in 1973. The Shah suggested to the British government (which owns 70% of British Petroleum, the company that leads the consortium) that Iran might not be able to buy all of the British industrial equipment for which it has signed contracts.

So far, such persuasion has failed to increase the consortium's take, but perhaps the new price reduction will. In any case, Iran's oil revenues should pick up as the industrial world's recovery from recession proceeds.

In the meantime, Iran is trying other means to get its budget back into the black. The Shah has launched a national anticorruption drive aimed at exposing graft schemes that have siphoned revenue out of the national treasury. Two former undersecretaries in the trade ministry stand accused of bilking the government of $45 million in a sugar deal with Britain. They will have to return the money plus a 100% penalty.

The biggest scandal, possibly accounting for more than $1 billion in waste, involves top navy officers responsible for military-spending programs. Rear Admiral Ramzi Abass Attaei, once commander of the Iranian navy, has been broken to captain. Other high-ranking officers have been jailed, and one navy budget officer committed suicide in prison--reportedly by swallowing a bedsheet.

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