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In mid-2008—the 100th anniversary of commercial oil discovery in Iran—the country’s petroleum deposits, the price of its crude, its foreign exchange reserves, its annual oil export receipts, and its annual trade surplus all set historic records.1 Iran also possessed the world’s second largest reservoir of natural gas. Such an immense fortune is understandably envied by the oil-less developing countries that face the dual problems of insufficient funds for their economic development and rising energy costs. The fortune is also coveted by energy-dependent developed nations that have to pay rising costs for their import needs and face payments deficits. This review intends to argue, however, that natural energy wealth is not always an unmitigated bliss, and that there are costly downsides to such envied endowments.
Iran’s Magnitude of Energy Bounty
With more than a century of oil discovery and extraction in its history, Iran is the oldest oil-exporting country in the Persian Gulf region. And with continued discoveries of new oil fields, its current reserves have always exceeded domestic consumption and exports. As a founding member of the Organization of Petroleum Exporting Countries (OPEC), Iran has also enhanced its intra-group rank from the fourth largest producer in 1960 to the second largest producer in 2008. Iran’s current proven oil deposits in situ are estimated to be 520 billion barrels, or about 11.6 percent of the world’s known petroleum reserves. At the relatively conservative 24 to 27 percent recovery rate, the country’s estimated available reserves are at 138 billion barrels
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