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Breaking News:

Oil Prices Rise On Surprise Crude Draw

Iran President Announces Russia-Backed “Budget of Resistance”

Rouhani

Iran’s President Hassan Rouhani announced a “budget of resistance” to U.S. sanctions, including a $5-billion loan from Russia.

Reuters quoted Rouhani as saying the budget would reduce Iran’s dependence on oil revenues to defy the effects of U.S. sanctions.

“This is a budget to resist sanctions ... with the least possible dependence on oil,” Rouhani said. This budget announces to the world that despite sanctions we can manage the country.”

The total size of the 2020/2021 budget is equal to almost $39 billion and is 10 percent higher than this year’s budget, Reuters noted, adding that it was lower in dollar terms because of a 35-percent rate of inflation booked for the current year.

"We know that under the situation of sanctions and pressure, people are in hardship. We know people's purchasing power has declined," Rouhani said as quoted by AFP. To this end, he said, the Iranian budget will also use a $5-billion investment from Russia.

"We hope that $5 billion in capital will enter the country, either through plans that have already been finalised or which will be finalised next year," the Iranian President said.

With or without help, it has become clear that Iran needs to diversify away from oil so its economy becomes more resilient to sanctions. Indeed, the non-oil economy will be a priority for the government in the next fiscal year, with Rouhani expecting it to be “positive” in 2020/2021.

At the same time, Iran will likely continue exporting oil and oil products, the latter not being covered by U.S. sanctions. According to Rouhani, Iran could earn $3.4 billion from oil exports next fiscal year.

"Contrary to what the Americans thought, that with the pressure of sanctions our country's economy would encounter problems, thank God we have chosen the correct path... and we are moving forward," he said.

There is always the possibility of Washington adding oil product exports to its list of sanctioned commodities, however. That would put further pressure on Tehran’s diversification effort such as it is.

By Irina Slav for Oilprice.com

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