ABSTRACT
This chapter presents an attempt to understand the determinants of the current oil policies of the Islamic Republic. It shows how and to what extent Iran remains dependent on the world market even after a revolution that has emphasized breaking all dependencies. The chapter discusses those factors that have had a profound impact on Iranian oil pricing and marketing: the state of the Iranian economy, the war with Iraq, the state of the contemporary oil market, and Iran’s adversarial relationship with Saudi Arabia and organization of petroleum exporting countries (OPEC). Since 1981, Iran and its colleagues in OPEC have faced a prolonged crisis that has shaken the cohesion of the organization and led to the collapse of world oil prices in the winter of 1985–1986. Iran’s oil policy-makers failed to appreciate the underlying trends in the world oil market that initially had permitted the Islamic Republic to engage in its high-price sales policy.
