Saturday, January 21, 2006

More on Iran

I despair of what to do about Iran getting the bomb. Brad Plumer has some interesting posts, but there's a quote from this post that confuses me:
Moreover, the Iranian national oil company estimates that it will need $70 billion over the next five to ten years to refurbish Iran’s decrepit oil infrastructure if the country is to continue to produce at current levels. Unfortunately for the mullahs, the only places that Iran can find these levels of investment are in Europe, Japan, and the United States. (Although some claim that rising oil prices, coupled with investment from Russia and China will suffice, none of Iran’s own economists believe it.)
Why isn't this a rational belief? Those costs - $70 billion over 5-10 years - break down to an annual maximium cost of $14 billion, but possibly as little as $7/yr. In 2004, Iran exported 2.5 million barrels a day (slightly more than Canada, as it turns out.) If we assume that production stays flat and prices increase to an average of $65 barrel this year (I think this is optimistically low, frankly) then Iran will sell almost $60 billion worth of oil this year alone. That's more than enough to meet the needs of the refurbishment - indeed, it's almost enough to finance the entire thing in one year. Unless the author Brad Plumer is quoting meant $70 billion a year over 5-10 years, in which case the situation is much stickier.

None of this addresses the funamental economic problems within Iran, of course. But I don't think Iran will be suffering for a lack of money for the next little while. On the other hand, I don't know when Iran's oil production is expected to peak.

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