Hamid Mollazadeh
Iran’s proposed budget for the year 1405 (March 2026-March 2027) stands at the crossroads of several hard economic realities. Oil has neither disappeared from fiscal decision-making nor retained its former role as the unquestioned backbone of public finances. Instead, the government appears to be walking a narrow line between financial realism and structural necessity.
A sharp reduction in oil-related figures in the budget tables signals an acknowledgment of global market constraints, persistent sanctions, and the chronic difficulty of repatriating oil revenues. Yet a central question remains unresolved: how much of the oil income projected in the 1405 budget can realistically be delivered, and how much reflects a downsized version of Iran’s long-standing dependence on oil?
According to budget estimates, Iran’s total crude oil revenue in 1405 is projected at roughly $21 billion, equivalent to about 560 trillion tomans at an assumed exchange rate of 28,500 tomans per dollar. This figure is based on the sale of around one million barrels of oil per day at a price of $57 per barrel. However, only a portion of this income—263 trillion tomans ($9.2 billion)—has been recorded under capital asset transfers as revenue that can actually be deposited into the government’s general treasury. The rest is effectively earmarked elsewhere, highlighting a growing gap between oil sold and oil income accessible to the government.
This marks a dramatic shift from the previous year. In the 1404 budget, oil revenues allocated to the treasury stood at around 539 trillion tomans ($18.9 billion). The more than 50 percent drop in the new budget can be read in two ways. On the one hand, it suggests an effort to reduce the budget’s formal reliance on oil. On the other, it reflects the practical constraints that have limited the government’s ability to freely use oil income. Oil, in other words, has shrunk in the budget—but it has not disappeared.
Close Scrutiny
The assumptions behind the budget deserve close scrutiny. The government has lowered its benchmark oil price from $63 per barrel in 1404 to $57 in 1405, a move that appears more aligned with recent trends in the global oil market. Brent crude has retreated from above $70 per barrel to around the $60 range amid oversupply, sluggish demand growth, and lingering geopolitical uncertainty. From this perspective, the choice of a $57 benchmark can be interpreted as a cautious attempt to anchor the budget closer to market realities rather than optimistic scenarios.
Yet the real challenge lies not in global prices but in Iran’s effective selling price. Iranian crude rarely trades at headline market levels. Mandatory discounts, higher transportation and insurance costs, sanctions-related risks, and banking restrictions all weigh on the final price Iran receives. Some estimates suggest that Iran’s actual oil price in 1405 could fall closer to $50 per barrel—or even below. Should this scenario materialize, even the budget’s conservative assumptions would come under strain.
Moreover, the main oil revenue number shown in the budget hides a deeper problem: how much of that income can actually be accessed and used. A significant share of Iran’s oil exports is conducted through barter arrangements, debt repayments, or mechanisms that keep revenues outside the direct reach of the treasury. Roughly $6 billion, for example, is allocated to the National Development Fund. As a result, lower oil dependence in the budget does not necessarily mean oil plays a smaller role in the economy; it often means the government has less direct control over oil income.
Decisive Variable
The repatriation of foreign exchange remains perhaps the most decisive variable. Sanctions have cut Iran off from the international banking system, forcing oil revenues into intermediary accounts with limited transparency. Even when oil is successfully sold, delays or disruptions in returning the proceeds can undermine budget execution, disrupt currency allocation, and complicate imports of essential goods such as food, medicine, and industrial inputs.
In macroeconomic terms, selling one million barrels per day at an average price of $55 would still generate around $21 billion annually. Combined with non-oil exports, Iran’s total foreign exchange earnings could, in theory, cover the country’s external needs. But this balance depends on several fragile assumptions: stable prices, manageable discounts, efficient sanctions circumvention, and—most critically—real access to foreign currency.
Ultimately, the 1405 budget reflects an attempt to manage expectations. By embedding lower and more cautious oil figures, the government hopes to avoid hidden deficits and inflationary pressures later in the year. Whether this strategy succeeds will depend largely on factors beyond its control, from global oil markets to geopolitical dynamics.
What matters most is not the price at which Iran sells its oil, but how much of that revenue actually reaches the treasury—and when. The answer to that question will determine whether the budget’s “cautious oil” can pass its real-world test.
