1
Examining Rentier State Theory in the Case of Iran
before and after Revolution
Pooyan Fakhraei 11768118
Supervisor: Dr. Farid Boussaid Second Reader: Mr. Said Rezaeiejan
June 2018
2 Contents
Introduction ...3
Literature Review...5
Rentier State Theory...10
Democracy and Autocracies ...11
Research Question ...18 Methodology ...19 Case Study ...19 Case Selection ...20 Data ...20 Limitation of Study ...21 Background ...22
The Role and History of Oil in Iran ...22
Contemporary Political History of Iran ...23
Political System in Iran...28
Finding and Analysis...31
Democracy...31
Oil Rent ...33
Political Economy of oil rent in Iran before and after the revolution ...34
1957 to 1979 (before the revolution)...35
Political economy of oil rent of governments after the revolution ...39
1989-2007 (Presidency of Rafsanjani) ...39
1997 to 2005 (Presidency of Mohammad Khatami) ...43
2005 to 2013 (Presidency of Ahmadinejad) ...48
Discussion and Conclusion...53
Discussion ...53
Conclusion ...54
Suggestion ...55
3
Introduction
Oil in the contemporary history of Iran is more tha n a source of production. It can be said to play a vital role in social and political history. Some examples are the role of o il as a key factor in the 1953 movement, when the U.S.S.R wanted the oil in northern Iran to balance power with the British, but instead the Parliament nationalized oil production. Later, the oil price shock became the reason of many changing policies under the Shah, which resulted in Dutch disease (Cammett, 2018). Many believe his policies in that era facilitated the revolution (Alikhani, 2013), which was heavily bolstered when staff and technicians of Iran’s oil company went on strike (Yazdi, Last attempts in the last days, 2007). Even when there were secret talks between Ayatollah Khomeini and United States government, the main question was the sale of the oil (Yazdi, 118 days in Neauphle- le-Château, 2013).
All of these incidents contribute to the popular belief that if Iran did not have oil, it might have become a democracy much earlier. And This is not only a popular belief among ordinary people. The relationship between oil rent and democracy has been discussed for years in academia. An overview of this belief, came as an empirical literature, provided by Ross (2001), in which he explains that while many studies connect an increase in the revenue streams of a government to the development of a more democratic system, this trend has a notable exception in the case of rent.
This, however, is not the only view that has been discussed by scholars. Others such as Herbs (2004) believe it is not oil which causes this situation, pointing to other conditions that should be together understood as the origin of the authoritarian undemocratic rentier state. Some like Habermas and Lewis believe that Islam is the main factor. Others still like Bellin believe it is a lack of stable institutions in these countries. Finally, the heritage of colonization is commonly provided as the reason of undemocratic behavior of states that have oil (Martorell, 2012).
As a way to further understand the case of oil rent and its relationship with democracy and authoritarianism, Iran is a good candidate as a case for study. As a country whose budget is heavily dependent on oil revenue, it is categorized under rentier states. Today’s definition of
4 rentier state even originated in Iran’s situation during the period of 1973 to 1979 when oil prices were raised dramatically. However, after the 1979 revolution and especially after the Iran-Iraq war (1980-1988), Iran has had a different experience in struggling with democracy.
Although after the 1979 revolution Iran has experienced partly effective and meaningful periodic elections for members of parliament and the office of President and in some era had more published newspapers and media and developed in the sense of freedom of the press. Based on these two examples, it can be assumed there is a change in democratic indexes, over time. It should be mentioned when it is a talk about the level of democracy; there is a range from full democratic to full autocratic. Any country could be somewhere in between these two extreme and Iran is not an exception.
This study would look to Iran’s records of oil rent and its growth in democracy indexes to test if the rentier state theory was applicable to Iran in the timeline of this study. Moreover, it questions the various explanations offered by scholars and seeks to determine if the possibly harmful effects of oil rent can be connected to struggles with authoritarianism.
5
Literature Review
The relationship between oil rent and democracy has been discussed for years in academia. A study by Link, W. K. (1952) looks at the exploration history of the important oil areas of the world, proving conclusively that oil and gas seeps gave the first clues to most oil-producing regions. Many great oil fields are the direct result of seepage drilling. Iran as a country, which depends on oil selling, is categorized under rentier states. From 1981, Iran was considered an important subject by many scholars (Assareh,2010), making it one of a number of countries that were discussed under the same category. For instance, Nigerian political history shows that the oil economy can also be a site of successful contention a nd democratization—and that oil workers played a key role in these processes. Although struggling in a deeply unfavorable context of state fragmentation, chronic societal mistrust, corruption, and lengthy, brutal military rule, at key junctures, oil workers are able to exercise leverage far beyond their numbers. A study by Aslaksen, S., & Torvik, R. (2006) indicated that, after controlling for other factors, countries rich in oil have a higher probability of dictatorship than other countries. In general, it seems fair to say that the results from the abundant empirical literature indicate that oil, gemstones, minerals and other “lootable” resources are associated with civil conflict, but that less lootable (and less valuable) resources such as agricultural land do not appear to have a similar effect. There are several studies on the issue of oil rent and its effect on democracy. Some scholars such as Ross (2001), who studied the effect of oil rent on democracy, and Tsui (2010), who examined the relationship between democracy and oil sources, believe there is a negative relationship between oil and democracy.
Ross uses cross-national data from 113 states between 1971 and 1997 to test the credibility of these claims: Does oil negatively affect democracy? Is it only the middle east and is it only oil rent that damage democracy or do other natural sources and other regions in the world also face the same relationship? Finally, if oil thwarts democracy, what is the causal mechanism? Ross finds that “the oil-impedes democracy claim is both valid and statistically robust, oil does hurt democracy.”
To test these claims, Ross designs a model “to predict regime types and test it using a feasible generalized least-squares method with a pooled time-series cross-national data set, which
6 includes data on all sovereign states with populations over one hundred thousand between 1971 and 1997. The model includes five causal variables that according to previous studies are the most robust determinants of democracy. It also includes variables that measure a state’s oil and mineral wealth to see if they add explanatory power.”
His dependent variable is the regime which drives from polity98 and his independent variables are oil and mineral supply. He also designed five control variables: income, Islam, OECD, the regime, and 26 dummy variables.
The result shows that both oil and minerals have a negative effect on democracy and also proves that oil and minerals damage democracy more in poor countries than in rich ones. His tests further show that the religion, culture, and age of countries are not valid excuses for less democratic states and the size of the country has only a tiny effect. “These tests support both the validity and the generality of the oil impedes-democracy claim. They suggest the following: that a state’s reliance on either oil or mineral exports tends to make it less democratic; that this effect is not caused by other types of primary exports; that it is not limited to the Arabian Peninsula, to the Middle East, or to sub-Saharan Africa; and that it is not limited to small states. These findings are generally consistent with the theory of the rentier state.”
As Ross explains to answer his last question, there are three mechanisms for this process: the government’s low taxation, prevention of the formation of independent social groups from the state, and failure to spend for modernization.
Tsui discusses the negative relationship between oil sources and democracy in non-democratic states. He uses the data of oil discoveries worldwide as evidence for the long-term effect of oil wealth on democracy. His work is the same as Ross but with a new piece of evidence. His hypothesis is the different effect that oil-discovery has in democratic and non-democratic states. His findings show that a larger oil discovery results in slower democratic transition. On the other hand, in democratic states oil discovery has no effect on democracy.
Democracy played the role of the dependent variable in his study and he used polity IV to measure democracy and oil discovery sources play the role of an independent variable. He tested these variables in 132 countries as his population. His result suggests that the discovery of more oil in reducing democratic values in less democratic countries has a more negative impact when
7 they found oil. “The oil-democracy interaction term is always positive, implying that the negative impact of oil discovery is larger the less democratic the country was before it found oil.”
There are other pieces of literature, such as Gawrich, Melnykovska, and Schweickert (2010), which reason that the main consequence of resource inflows is that the state is freed from the need to extract income from the domestic economy or from local citizens through taxes. The government can then embark on large public expenditure programmers without resorting to taxation.
As Ross (2011) suggests in his 2004 study, if taxes are raised, they demand democratization. “Citizens object to paying higher taxes if they do not receive commensurate bene fits” (P67). In other words, citizens care about both benefit and taxes, and they want less tax for more benefit. Authoritarian governments, which can reduce taxes and provide efficiently are able to avoid democratization.
In addition, another study by Auty (1997) also indicates that the adverse effect of resource abundance on institutional quality is particularly strong in the case of easily accessible ‘point-source’ natural resources with concentrated production and revenues and thus massive rents, and oil, crops rather than agriculture. Auty (1997) believe Natural resource endowment, the state, and development strategy. Journal of International Development: The Journal of the Development Studies Association, 9(4), 651-663.
An important article by Herb (2003) examines “the link between rentier-ism and democracy using a cross-regional dataset,” and suggests that “there are both positive and negative effects of rentier- ism on democracy.” He argued, “Democracy scores in the surrounding region are strongly correlated with a country’s own democracy score.” He believes that Ross’s approach is not the best for understanding the effect of rent on democracy, reminding the reader that the main objective of rentier state theory is to prove a correlation between the absence of oil and better scores in democracy. To do so, he employs a counterfactual world, which replaces these countries’ per capita GDP figures with an estimation of what their per capita GDP figures might have been in the absence of oil rents. He believes if we “use this measure in place of standard per capita GDP, and if the measure of rentierism continues to be negative and statistically
8 significant,” then it can be concluded, “rentierism has a harmful net impact on democracy.” His results suggest that the theory of rentierism being harmful to democracy has not found consistent support. In explanation, he points to rentier states being among the most poor countries in the world, and in poor countries authoritarianism is typically more expected.
There are other studies which look for other reasons behind the assumed negative relationship between oil and democracy. For example, Gawrich, Melnykovska, and Schweickert (2010) argue that more than oil, geography and neopatrimonialism are a strong explanation of bad governance and autocratic stability in Central Asia. This paper was presented at the Neopatrimonialism in Various World Regions Workshop.
Coppedge, Gerring, Altman, Bernhard, Fish, Hicken, and Semetko, (2011) discussed the measurement of democracy/autocracy. They argued, “there is no consensus about how to conceptualize and measure regimes such that meaningful comparisons can be made through time and across countries.”
Alexeev and Conrad (2008) measure long-term growth via GDP per capita levels and show that oil and mineral resources did not inhibit long-term growth but enhanced it. In addition, they show that the impact of oil and minerals are largely neutral to the quality of institutions in the countries. To prove their point, they reason that based on their first agenda, the assuming relationship between GDP and natural resource endowment was not adequately accounted for in the literature on the issue. Based on their findings, they claim that the increase in GDP is the result of natural resources but does not significantly change the quality of institutions. “We demonstrate that “manna from heaven” wealth that causes an increase in GDP (i.e., “exogenous” growth) does not lead to better institutions, although it does not undermine the quality of the existing institutions either” (P5).
In an important book chapter, Mahdavi also discusses Iran’s situation before the revolution. In one his chapter titled “The Patterns and Problems of Economic Development in Rentier States”, he examines the definition of rentier state and proposed a pattern to understand the problems of a rentier state. In this chapter, he explained that in the oil producing countries, apart from Kuwait and Qatar, the added value of oil products from GDP varies between 10 to 55 percent, whereas in transit countries the added values of oil make up 2 to 4 percent of GDP. He then points to
9 countries such as Iran, Iraq, and Saudi Arabia, where the effect of oil production is significant, the other sectors are not of secondary importance. He believes the major contribution of oil industry is “to embark on large public expenditure programs without restoring on taxation and without running into drastic balance of payment or inflation problems that usually plague other developing nations” (Mahdavi, 1970, P432).
The historical point that he puts his finger on is the dramatic changes that occurred after 1955. The imports increased over five times which resulted in government expenditure to increase rapidly. He believes these changes, when compared to the first half of the 19th century, shows a new regime of governance had been established. However, these heavy investments did not change economic growth or development of the country. He believes the oil rent could not exclude a country such as Iran from underdeveloped countries based on the rate of economic growth in Iran from 1955 to 1965 was not more than two percent on an annual per capita basis. He suggests the reason behind suffering of Iran is socio-economic structure of these countries and argue the financial resources could not be used properly until socio-political barriers to be removed. When Iran in early 1960 had some level of reform, mostly land reform, it positively affected on its growth.
Mahdavi did not discuss (effect on oil) directly on democracy but he discussed people economic participation and effect of the oil rent on it. He believes oil rent did not significantly affect mass of people, despite huge amount of investment in development program. Therefore, participation of people in economy were extremely low and “the investment funds in industrial sector was not actually used to develop industries with the highest value-added per worker” (Mahdavi, 1970, P465). There was gap between rural and urban area and another gap was created between government staff and people who worked in private sector. In addition, people increasingly bought imported commodities, which is the result of oil rent, “at the same time, the level of economy’s technology, the nature of its socio-political organization and the standard of the people’s general education and training are such that little optimism is warranted as far as the long-run growth prospect of the country are concerned” (P466). Mahadavi concluded that Iran’s economy did not develop with flow of the oil rent over time, and it was still depended on oil price and weather condition for farmer.
Clearly, there are two main theories here: one of them found a direct relation between oil and democracy and the other one denied a meaningful relationship between these variables. What
10 Mahdavi suggests about Iran follows the first theory and as what he described the oil revenue would not be ended to more public participation.
Rentier State Theory
A rentier state is a country that depends on rent of oil or natural resources, and their income affects economics, politics, and society. This theory is mostly known by a definition from Hossain Mahdavi, who described a rentier state as “a state that receives substantial rents from foreign individuals, concerns or governments” (cited in Sandbakken, 2006).
Mahdavi (1970) offers this theory to describe an era from 1970-1976 in the political history of the Middle East. In describing the rentier state, he explained that those countries that receive an amount of external rent by foreign individuals, concerns, or governments on a regular basis are contained in this definition. Based on this definition, payment by foreign countries, companies, or individuals who passed through a canal such as the Suez Canal or those who received payment for the pipeline would both be counted as examples of these external rents. The oil revenue of oil exporting countries is another form of rents.
On the other hand, the oil revenue in a rentier state has very little to do with the local economies of those countries, and its input is often not significant. “There is a lack of any meaningful relationship between the level of oil production and the local economy of the producing countries” (Mahdavi, 1970, P 435).
As he believed that oil revenue let governments spend on public programs without resorting to taxation or running into drastic balance of payment or inflation problems, this process also makes the government an important factor in the economy.
Hazem Beblawi suggested the rentier state is a state in which the economy is dominated by rent (Sandbakken, 2006). He describes the sources of rent (1) to come from abroad, (2) be accrued to the government directly, and (3) “only a few are engaged in the generation of this rent (wealth), the majority being only involved in the distribution or utilization of it.” (Herb, 2003)
11 In defining a rentier state Sandbakken (2006) believes “it is not equivalent to a state in which rent-seeking predominates among economic and political elites. Rent-seeking is the search for financial gain or profit from non-productive economic activities that are especially prevalent among those who depend on state privilege for access to credit, grants, licenses, contracts, and, often, monopoly markets.”
Democracy and Autocracies
When discussing rentier states, the question of how rent affects the democratic process or the transmission from authoritarianism to democracy naturally arises, but before turning to these questions, democracy and authoritarianism should be defined.
There is not universal agreement on the meaning of democracy (Ross 2011), but in a classic definition, democracy describes a method of ruling. In a general view, “all usages of the term also presume sovereignty. A polity, however large or small, must enjoy some degree of self-government in order for democracy to be realized” (Hicken, 2011).
Marshall and Jaggers (2002) defined democracy in Polity project. “Democracy is conceived as three essential, interdependent elements. One is the presence of institutions and procedures through which citizens can express effective preferences about alternative policies and leaders. Second is the existence of institutionalized constraints on the exercise of power by the executive. Third is the guarantee of civil liberties to all citize ns in their daily lives and in acts of political participation. Other aspects of plural democracy, such as the rule of law, systems of checks and balances, freedom of the press, and so on are means to, or specific manifestations o f, these general principles” (P13).
As Ross mentions, Przeworski explains that there are four conditions that most would likely accept: that the chief executive of the government and the members of legislative branch should be chosen in an election, that there are at least two majo r political parties that have the chance to participate in elections, and that they can be defeated and replaced.
In defining democracy and distinguishing it from autocracy, different elements are involved. “The independent judiciary, the courts, the respect for law, or whatever other mechanisms ensure
12 that a democracy abides by competitive elections held according to law, necessarily also ensure that the citizenry has the freedom to do whatever is permitted under the law” (Clague, Keefer, Knack & Olson, 1996 , P6). On the other hand, the rights of women or people of color have not been secured in many established democracies, complicating these more general definitions, but nonetheless, a stable democracy could not be established without granting these kinds of rights and guarantees broadly.
Further, when it comes to measuring democracy, these debates go on to include some indexes that gauge freedom and plurality. Coppedge, Gerring and others (2011) stated “the Political Rights index includes questions pertaining to corruption, civilian control of the police, the absence of widespread violent crime, willingness to grant political asylum, the right to buy and sell land, and the distribution of state enterprise profits. The authors of the index would argue that it measures freedom, not democracy; nevertheless, it is frequently used as an index of democracy” (P 248-249)
On the other hand, authoritarianism is a form of absolute power in the hands of a central government, which limits political freedom (Sekiguchi & Masashi & Okawara, 2009, P92). Common features of authoritarian governments are limited political pluralism, minimal social mobilization, static executive power, and an emotional basis for political legitimacy (Casper, 1995, P 44-50).
In the polity project defined autocracy as kind of state that “sharply restrict or suppress competitive political participation. Their chief executives are chosen in a regularized process of selection within the political elite, and once in office they exercise power with few institutional constraints” (Marshall & Jaggers, 2002, P14).
In the Middle East, most governments are of an authoritarian format. There are four main theories used by scholars to explain the reason for the predominance of authoritarian rule in the Middle East, which are well categorized by Benjamin E. Martorell (2012).
The first theory comes from the cultural background of this region. Scholars like Samuel Huntington believe that the dominant culture of Islam in this region prevents the region from becoming democratized. In his 1993 theory on the clash of civilizations, Huntington wrote that “Islam has not been hospitable to democracy.” His reasoning is based on the role of Sharia in
13 Islam. Elie Kedourie discusses the democratic West as a result of the western culture and tradition of representative government and sovereign nation-states, which do not have ad Islamic equivalent. Other scholars, such as Lisa Anderson, have rejected this singling out of Islam and identify Islamic Sharia as merely exemplary of a common feature of many religions, which frequently have their own forms of Sharia.
The second reason comes from scholars like Bellin. He believes that the lack of “democratic prerequisites” in the Middle East’s institutions is the main reason behind the undemocratic situation of this region. The absence of strong civil societies, market-driven economies, high literacy rates, and representational government institutions accounts for the lack of democratic prerequisites. This can be seen as broadly inapplicable, given that many states in the region have institutions such as a parliament, an executive, political parties, and elections. “Stephen Cook (2005) argues that it is not a lack of institutions in the region that prevent democratic reform and development; rather, it is the flawed “nature” of the institutions themselves that “tend to restrict political participation, limit individual freedom, and vest overwhelming power in the executive branch of government.” The manipulated election in the region is very common, in Egypt, Syria, and Iran. In Egypt as an example, “party contested parliamentary elections began under late president Anwar Sadat in 1976. However, according to Posusney, Sadat ensured that the government-backed party would win the majority of the seats, which is what occurred. In 1984, President Hosni Mubarak led a new round election but the outcome remained the same: the ruling party, which came to be known as the National Democratic Party, won the majority of the seats, while only garnering 73% of the popular vote.”
The third explanation of authoritarianism in the Middle East comes from external colonialism in this region. The presence of British and French colonists because of oil and other factors and the way they split countries are one of the reasons authoritarian regimes have developed in this region.
The fourth explanation is rentier state theory. The Middle East is one of the richest regions for oil and gas deposits, but some scholars such as Ross and Tsui believe that oil rent and oil sources do not let democratic mechanisms take place. Ross (2001) had explained three main mechanisms by which an authoritarian government prevents the system to become democratic. The first mechanism is the taxation effect in which oil revenue allow governments to maintain low taxe
14 rates or take nothing as tax, placating the population and preventing them from demanding accountability or representation.
The patronage mechanism is the second, in which the government spends money on programs that their society demands and shifts focus away from democracy. In this mechanism, governments spend oil revenue on preventing the formation of independent social groups from the state that may be inclined to demand political rights. There are two explanations for this: independent social class such as an independent bourgeoisie helped to democratic demand of societies, and the other is “the formation of social capital—civic institutions that lie above the family and below the state—tends to promote more democratic governance.” There is, also, the linkage between authoritarianism and oil-democracy. As Ross concluded from different case studies, the demand of democracy is not different in countries but the rentier state has more sources to spend on internal security policies to protect the regime, itself, and the resources. The last explanation of Ross comes from modernization theory, which claims that unlike the rentier and repression effect, modernization should work with a social mechanism, and if the wealth does not provide higher education level of society or greater occupational specialization, it will fail to bring democracy for that country.
Iran, as a country in the same region, should be understood in this context. Iran struggles with the same issues and had absolute ruling regimes for millenniums, leading any attempt to be democratic in the last 150 years to fail. However, any of these four categories could not explain the case of Iran on their own. Iran as an Islamic country has a common area with the first theor y by Huntington and others that suggest Islam is preventing democracy in this region. Despite the fact that this theory was based on an orientalist perspective, the majority of Iranians are followers of the Shiite sect, and after the revolution, the entire system is based on this school. The Shiite school, which employs the Ijtihad method of Shariah law, has a different approach toward Islam, compared to the Sunni school, making it not as orthodox as most Sunni sects. In fact, the Shiite school is mostly known as the Iranian version of Islam, and as Shreen Haunter quoted Ada Bozman “if Islam conquered Iran, then Iran conquered Islam.” Iran also has a different ethnicity, language, and culture than most Islamic countries, which makes it a unique case (Hunter, 2017).
15 The second approach based on the lack of institutions also cannot wholly explain the lack of democracy in Iran. Iran has established institutions since the Constitutional Revolution in 1906. Since then, the parliament was formed and the head of the executive was chosen by members of parliament or directly choose by people. Iran has a rooted private sector in its traditional market and has a strong civil society and labor unions. The elections may not be fully free or ope n, but enough institutions are in place to render this explanation inadequate on its own.
The third approach focused on colonialism as an external factor in authoritarianism also cannot entirely explain the case of Iran, which has never been a colony since the decline of the Timurid Empire in Iran in 1506. Since 1507, Iran has had a central state ruled by the Safavid dynasty. Under that leadership, Iran has been invaded and even partly occupied by foreign super powers, but never colonized in the meaningful and long-term sense seen in other countries with colonial legacies. One the most famous examples is the 1953 coup against the democratically elected government of Dr. Mohammad Mossadegh by British and American intelligence services. Thus, colonialism is not an explanation for the lack of democracy even if super powers negatively influenced the path to democracy to a degree.
The last explanation is the role of oil rent, which is the main subject of this research. But one point that could reject this explanation is the timeline of the rise of oil rent in Iran, which took place in the 1970s, but Iran was an authoritarian state for all of its modern history. Therefore, this factor also cannot not explain the issue in its entirety, rather only elucidating t he many influences that led to its unique current position.
It is worth noting that Iran has a complicated system of taxation through its history dating back to King Scyros. Before the Constitutional Revolution, there was only direct tax, but after the revolution, the Iranian government started to collect indirect tax on salt, opium, alcohol, and other goods (Shirinbakhsh, Bigdeli, Yusefifar & ,Sheikhnuri, 2017). After the 1979 revolution, the government continued to collect tax on property such as real state tax, capital gains tax, and the income of individuals. For example, a public sector employee pays about 10% of their income in tax to the government. There is also an indirect tax that the government collects on value added on goods and services, such as cigarettes and tobacco, petrol, and others (What is type of taxes in Iran, 2014).
16 There have also been modernization programs in Iran since 1960s. After the White Revolution of Shah and Nation, which was a referendum in 1963, the government started to enact a social transformation with four major programs. They shared farmland ownership with farmers. In the next step, teachers, experts and medics were sent to villages to reinforce them as the army of knowledge, the army of health, and the army of construction; these groups provided health, taught illiterate people, and modernized agriculture (White Revolution Law, 1961).
After the revolution, these policies continued under the Islamic Republic regime. 14 million out of a population of 36 million were illiterate in 1979. In 2015, as the head of movement for literacy reported, there are about ten million out of 80- million, that are illiterate or less educated (Bagherzade, 2015). As ex-chancellor of Tehran University reported, the number of graduates of universities after the revolution increased by 90 percent (Rahbar, 2013). The electricity rate, gas supply, access to telephone and internet and health services in villages after revolution had dramatically increased (Fallahi, 2014). All of these show that modernization was a program of Iranian regimes before and after revolution, and thus the lack of such programs could not a compelling case to explain the lack of democracy in Iran.
In Iran, regimes always try to make the social classes dependent on them. The formation of the Iranian middle class was the result of Reza Shah’s modernization that brought bureaucracy, universities, a modern army, a judiciary, and even scholarships for students to study abroad. The Shah continued these programs in his era. On the other hand, the main force for the 1979 revolution was the lower class, which after the revolution became the main target of government services and subsidies, including priority in becoming public services employees (Fakhraei, 2018). These strategies of the regimes in Iran were not based on oil, and Reza Shah began the programs long before oil even had a role in the Iranian economy.
The security forces in Iran had a very significant role in crushing and suppressing democratic forces in Iran both before and after the revolution, but it is again hard to link this factor to oil. SAVAK, the Organization of National Intelligence and Security, was established by Shah in 1957, when the oil of Iran was not in the control of the Iranian government (Abrahamian, 2008). Most of the successful attempts of SAVAK to find and crush anti-regime forces were before the oil shock in 1973. After the 1979 revolution, SAVAK was transformed to the intelligence ministry under the government, but Iranian security forces had expanded and some organizations
17 like the Iranian police, the Revolutionary Guard, and the Judiciary established their own security police (How many security agencies are active in the country?, 2014). However, there is no proof to link this diversification to oil rent, especially when the government was not in favor of this idea.
In summary, none of these theories can give a comprehensive understanding of the reason for the absence of democracy in Iran, but each of them can at least partially add to an understanding of the issue. As an Islamic country with powerful Islamic institutions, Iran has produced a powerful traditional market that does not act in favor of democracy. The democratically elected institutions are struggling with a lack of power and security forces restrict pro-democracy institutions such as civil society and unions. Foreign powers have played a negative role in Iran path to democracy and oil rent at least was not a positive and significant factor for democracy. The main factor that has been underestimated by scholars is the role of geography in shaping Iran’s power distribution, social relations, and history. An Iranian theorist, Mohsen Ghane Basiri (2014), offered a theory based on four classical elements that suggested that the main factor in shaping a civilization in the Middle East is water, and all civilizations in this region were founded near a river or between rivers to establish agriculture. The Sumerians, Akkadians, Assyrians, and Babylonians are examples of this kind of civilization. In the water-based civilization, political establishment is formed before economic relations and it becomes the main factor of social interactions. Whoever controls the water also becomes the most powerful group in that region. On the other hand, the European civilization is based on soil because of the prevalence of rain. Under that system, anyone could have a piece of land and establish a farm. Thus, in European civilization, the right of ownership and trade produce economic relations that are the base for all subsequent social interactions (Ghanebasiri, 2016).
Authoritarian regimes in the Middle East are the heritage for this format of power shaping, which have influenced culture and society throughout the history of their political establishments. This model, despite all other factors, could explain why Ira n as a country based on an agricultural economy with a very limited source of water has struggled with authoritarianism and never achieved full democracy.
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Research Question
Ross claims that oil revenue is acting against democracy. The more a state has depended on oil revenue, the more issues they have reflected in their democratic index. Therefore, the relation between oil and democracy is an inverse relationship. It means that when oil rent rises, the democratic score should be drop.
On the other hand, Herb believes there are other factors involved in the relationship between the state and democracy, more than just oil rent.
Based on this conflict, what is the relationship of oil rent and democracy in Iran before the 1979 revolution and after the Iran-Iraq war? Does the rentier state theory explain the score of democratic indexes in Iran in different eras, such as 1970-1979 and 1988-2013? Has Iran changed before and after the revolution in democratic indexes in respect to the share of oil rent? In this study, the democratic index is the dependent variable and oil rents and revenue during eight Iranian governments is the independent variable.
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Methodology
The methodology of this study will be a qualitative approach. In an analysis of the case study, I will examine the relationship between oil rent and democratic indexes in two different eras. The political economic approach of the Iranian government, different democratic indexes, and oil revenue are the main measurements employed in this study.
Case Study
“Case study”, as Cresswell (2008) categorized it, is a qualitative research strategy (P12), that goes through the past studies’ report to allow “the exploration and understanding of complex issues. It can be considered a robust research method particula rly when a holistic, in-depth investigation is required” (Zainal, 2007). This method gives an opportunity to a researcher to examine data from the past researchers closely.
A definition of the case study research method by Yin (1984) stated, it is “an emp irical inquiry that investigates a contemporary phenomenon within its real- life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used” (cited in Zainal, 2007, P2).
Seawright and Gerring (2008) believe selecting a case to study is based on how the sample is representative (of a state with oil rent) and how useful is its variation on the dimensions of theoretical interests (P296), since there are various categories of cases such as typical case, influential case, and extreme and so on.
This study is an example of a typical case: “The typical case study focuses on a case that exemplifies a stable, cross-case relationship. By construction, the typical case may also be considered a representative case, according to the terms of whatever cross-case model is employed” (Seawright and Gerring, 2008, P 299). Iran, like many other producing oil countries have used oil rent in its economic approaches, so it is representing of a typical case for study.
20 Case Selection
To understand the relationship between oil and democratic indexes, Iranian governments before the revolution and after the Iran-Iraq war under different administrations and regimes would be the most appropriate case.
This timeline is an important period since Iran had an established and stable government with normal vartiations in the price of oil. Before the revolution of 1979, Iran was a classical rentier state from 1970 to 1979. From 1979 to 1989, Iran was engaged in revolution and war, and these two factors would not allow for a proper study. But after 1988, four presidents who have belonged to different blocs of power came to office and each served two terms: Rafsanjani who was then a conservative figure, Khatami as a reformist, and Ahmadinejad as a hardliner. In all of these governments, their budget was heavily dependent on oil revenue but their experiences in the democratic index have varied. The different approach in these eras to the role of democracy and government can be an alternative explanation for their different government’s results in the democratic indexes.
Data
To collect data for this study, data from the World Bank that measured oil rent is used. They measure the oil share in GDP of countries.
To measure democracy, Ross uses a model from the Polity 98 dataset constructed by Gurr and Jaggers. Gurr and Jaggers compile two extremes from 0 to 10 interval scale variables with 10 meaning democratic and 0 Autocratic. In this study, the Polity data series is also us ed, which is an established measurement of democracy. For each year and country, a "Polity Score" is determined which ranges from -10 to +10, with -10 to -6 being named autocracies, -5 to 5 corresponding to anocracies, and 6 to 10 to democracies.
21 Limitation of Study
This study is skipping 1979 to 1988, which was the period of Revolution and war, thus leading to Iranian governments without a stable situation.
Another limitation in the timeline of this study is the current President Rouhani administration. Because the data is not released on his government yet, his administration’s outcome is not traceable.
22 Background
The Role and History of Oil in Iran
Iran oil’s revenue was in the monopoly of a foreign oil company since the beginning. In 1901, Iran’s king had an agreement with a British man named William Knox D’Arcy that lasted 60 years to have a monopoly over the exploration and extraction of oil in most of regions in Iran, covering about 400,000 miles. In return, they had to pay 20,000 GBP worth of s hares in the Anglo-Persian Oil Company (APOC) to the Shah and pay sixteen percent of revenue to Iran. If they could not find oil, Iran would not be included in the losses, but in 1908, oil was indeed discovered in the southern part of the country (D'Arcy Concession and Iran Oil, 2010).
When Britain charged Iran 500,000 GBP after an attack on the pipeline by German troops during the First World War, Iranians felt they had been cheated and were not happy with the condition of Iran under the D’Arcy concession. Reza Shah attempted to revoke that agreement, leading to a new negotiation, which concluded with the 1933 agreement. In this new agreement, the area which the British could explore for oil was limited to 100,000 miles and Iran’s share from any possible revenue rose to 20 percent. The company also became responsible for the security of pipeline, but in return, the new agreement added another 32 years to the sunset of agreement. The Parliament of Iran approved the deal as a result of pressure from the Shah, but it did not last long (Purjaafari, 2017).
The next attempt to change the condition happened in 1949 through an extension agreement, which again increased Iran’s revenue, but this agreement was not approved by the Iranian Parliament ( Gass-Golshaian contract was not approved, N.D). In 1951, the Iranian Parliament, under the leadership of Mohammad Mossadegh, passed a bill to nationalize oil. Based on this bill, only the Iranian government could explore, extract, and sell any of the Iranian oil (Details of the Oil Industry Nationalization Act, 2007). In the preceding political battle, he had the upper hand based on his popular support and became prime minister to carry out this law, but his effort was halted. Britain passed sanctions, using international law against Iran and giving Mossadegh a chance to make his case before the Security Council. The Security Co uncil left the decision for the International Criminal Court and this court disqualified themselves, returning the decision to
23 the parties (I am the voice of Iranians, 2016). The two parties did not come to conclusion and in 1953, after two years, he was toppled by a coup that was staged by the American CIA and British MI6.
After that, Iran’s oil industry became a subject consortium of different American and European companies, and foreign countries gained the right to explore and extract oil, giving Iran 50 percent of the profits from prod uction. Despite this, Iran did not have an effective role in consortium and had to pay compensation to British Petroleum (Maloney, 2015).
In 1957, the Iranian Parliament broke this monopoly over Iran’s oil and lured non-consortium actors into Iran’s oil industry. Iran found some parties to invest and seek opportunities in their industry. In the first contract, Iran found Italian firm ENI, which would receive 75% of all oil profits, shattering the prevailing fifty- fifty (Maloney, 2015). Maloney believes this was a paradigm shift in Iran’s oil sector, noting that “Over the next dozen years, Iran signed joint venture agreement with American, European and Japanese oil firm” (cited in Maloney, 2015, P 64).
Statistics show that since 1957 at least 50% of the Ira nian government’s income comes from oil (Mazhabi & Amooei, 2008), meeting the requirement of Beblawi’s definition, which requires a rentier state to derives at least 42% of its income from oil revenue. Based on this statistic, other scholars such as Mahadavy have agreed that Iran is a classic example of a rentier state.
Contemporary Political History of Iran
As Baghi (2000) explained, there are two major incidents in that changed Iran’s direction in contemporary history in Iran: the Constitutional Revolution and the Islamic Revolution.
The constitution revolution, which took place from 1905 to 1911, featured Iranians unhappy with absolute rule by monarchs changing their political system to a constitutional monarchy. Therefore, the main objective of Iran was establishing a parliament and judiciary.
In the background of Constitutional Revolution, there were two important incidents. First, the Tobacco protest in 1891 was essential to the Constitutional Revolution (Rais-nia, 1971). When
24 Naser-al-Din Shah of Iran signed a 50 years contract with Major Ta lbot of the United Kingdom, he gave him a complete monopoly over the production, sale, and export of tobacco of Iran. In response, the Grand Ayatollah Shirazi issued a religious statement forbidding the use of tobacco for any Muslim. The reason behind this Fatwa was the essence of the contract, which was against the sovereignty of the Muslim nation. Shah tried to resist, but the strength of the wave of backlash across society ultimately overcame him, with even his wives intervening by refusing to allow Shah to smoke. Shah stepped back and the tobacco concession was revoked. This marked the first time that Iranians successfully acted against Shah and pushed him back on an issue (Madani, 2008).
The second was the publication of several newspapers outside of Iran in this era, which played a vital role in the Constitutional Revolution. Newspapers like Akhtar (“Star”), which was published in Istanbul; Qanun (“Law”), which was published in London; Habl-of-matin (“Solid Rope”) published in Kolkata; Hekmat (“Wisdom”), Soraya (“Universe”), and Parvaresh (“Training”) all published in Cairo were the main channels used to prepare and promote the Constitutional Revolution. They directly criticized the king and published news of revolutionary incidents in other countries, and years before the revolution began, the number of newspapers published outside Iran continued to drastically increase. Due to this, the government had to ban the reading of newspapers and detain many journalists. In response, journalist started to publish confidential papers (Roshan, 2005).
In fact, it was the consequences of a clash between traditional Iran and modernism. The Iranian people had witnessed the changes of the modern West while their own country remained stagnant, so they found a solution in the rule of la w instead of the Shah (Fakhraei, 2018).
The first wave for the Constitutional Revolution was started when a tax collector, who took money to pay back the loan that Shah took from Russia to travel Europe, punished two merchants who charged extra for their goods. The public and clergy members protested and asked for the chief minister to be replaced and a judiciary established. After a month, Shah accepted the people’s wish but he had not acted quickly enough and a person had been killed. This became the reason for the second round of protests, which broke out when the government cracked down on protestors. Clergy members went from Tehran to the holy city of Qom and threatened Shah that they would leave the country and go to holy city of Najaf. The chief
25 minister stepped down, but the public wanted a parliament and constitutional monarch. In August, Shah signed the constitution law and an election held in Iran chose 156 members of Parliament (Madani, 2008).
Soon after, Mozafar-Al-Din Shah died and his son took over. Mohammad Ali Shah, with s upport of the Russian and British governments, dissolved the Parliament and abolished the constitution. A military resistance was formed in different provinces and took over Tehran. They forced the Shah to exile and his young son replaced him.
The British and Russians had conquered Iran during First World War. It leads to weaken central government and Iranians had suffered from lack of security and 1917-1919 famine, in which Kasrawi claimed one third of Iranian population lost their lives (Kasravi, 2003). These incidents pave the way for Reza Khan, head of Persian Cossack Brigade in 1921, to become War minister and later to his premiership. After that, while he enjoyed public support, he dissolved the Qajar dynasty, established Pahlavi Dynasty, and called himself Reza Shah (Ghani, 1998).
In his era, He successfully tried to raise security in the country and crack down on the heads of tribes in Iran who wielded considerable power. His next program was authoritarian modernism, using the model of Ataturk in Turkey. He established a modern b ureaucracy, judiciary, university, and army. He had sent Iranian students to Europe with scholarships and made military service compulsory. On the other hand, he forced women to unveil and suppressed any political parties and journalists. He jailed and exiled many of his opponents and even killed some of them. His ruling continued until the Second World War. During the war, the British and Russians had decided that Reza Shah was in favor of Germans. They conquered Iran, removed and exiled him, and ensured that his son, Mohammad Reza, was sworn in as the new king (Baghi, 2000).
Mohammad Reza Shah’s reign can be separated into two periods. Before 1953, he was young and did not have a stable base of power. The society enjoyed a good amount of freedom and free newspapers and political parties played a vital role in this period. The opposition figures, such as Mossadegh or Ayatollah Kashani, had the chance to run and become members of parliament. In this context, the parliament passed a bill to nationalize the oil against Sha h’s will and Mossadegh became prime minister to enforce this law. He ousted the British, but they responded with sanctions (Details of the Oil Industry Nationalization Act, 2007). Shah tried to remove
26 Mosadegh, but failed and fled to Rome. British and American intelligence services together ran a coup against him, toppling him. He was put on military trial and jailed. Later, he was put under house arrest until his death. His foreign minister had been executed and many of his followers jailed (Nejati, 1991).
Shah came back from his short exile and retook control with absolute power. The parliament was under his full control and prime ministers were chosen by him. In that period, he signed a consortium for oil with the Europeans and Americans. In the early 1960s, he accepted a moderate prime minister under the pressure of the Kennedy administration and ran his reform plan named the White Revolution. In this plan, he reformed land ownership, shared the land with farmers, and sent medics and experts to develop the rural areas and transfer the country from feudalism to industrialism (Abrahamian, 2008).
In this era, he put more pressure on his opponents by establishing SAVAK, cracking down on religious clergy members who opposed his reform plan, and sending Ayatollah Khomeini to exile. He also jailed all of the National Front’s leaders and put Mehdi Bazargan and his party members, Freedom Movement of Iran, on trial and jailed them. Later SAVAK crack down and executed youth movements who wanted to fight with arms (Nejati, 1998).
Shah appointed Hoveida as Prime minister for thirteen years, and as Alam, his nearest advisor and former prime minister, reported in his memories, he made all important decisions himself. He started many industrial plans after the oil price shock and said he wanted to pass the country through the doors of big civilization. His attempt was not successful and the economic consequences shocked the society and resulted in a wave of dissatisfaction (Nejati, 1191). When Carter came to power in the United States, he was faced with critics over his human rights reputation. He started to change prime ministers and in two years, Iran had four prime ministers. Nevertheless, they could not solve his problem and the revolutionary forces became stronger. On the eve of 1979, he left the country, and Ayatollah Khomeini came back from his exile and appointed Mehdi Bazargan as the prime minister of the interior government (Yazdi, 2007). The government of Bazargan was formed from mostly old nationalist and liberal technocrats but did not last long, due to disagreements between Bazargan and Khomeini in many cases and the intervention of the radical pro revolution youth and clergies who were near to Ayatollah
27 Khomeini. After nine months, when a group of Muslim students attacked the United States embassy in Tehran and took its staff as hostages, Bazargan and his government stepped down. Soon after, the first presidential and Parliament elections took place (Behnoud, 1998).
Abolhasan Banisadr was chosen as president, who was a Muslim socialist and most of the members of the parliament were chosen among members of the Islamic Republic party who were allies of the Ayatollah. In a couple of months, Iraq attacked Iran and took over many cities in the Khuzestan province. After about 20 months, the conflict between the parliament and the president intensified, and the parliament disqualified President Banisadr, and his prime minister, Mohamad Ali Rajai, won the election. On the other hand, clashes between MEK militia and government grew, and after disqualifying Banisadr, they bombed the headquarters of the Islamic Republic party, the offices of the president and the head of the judiciary; President Rajai, Prime Minister Bahanor, and many members of Parliament and at least six ministers were killed (Banisadr, 1999).
Ali Khamenei was the next President and Hossain Mousavi became his prime minister for about eight years. He enacted leftist policies and used coupon policies during war. During this era, the society was closed and no opponent parties and figures could run for election. Even Mehdi Bazargan was banned from running for election in 1985 (Reasons for Disqualifying Bazargan in the fourth Presidential Election, 2017). Many members of the militia groups were executed. By the end of the war in 1988 and the death of Ayatollah Khomeini in 1898, President Khamenei was chosen as Supreme Leader to replace Ayatollah Khomeini, and Rafsanjani, the speaker of parliament, was chosen to replace the president. The economic policies of Rafsanjani were more pro-capitalism, but the social and political policies were still closed (Abrahamian, 2008).
In 1997, a liberal figure named Mohammad Khatami was chosen as president and he continued liberal economy policy and much more liberal cultural, social, and political polices. The forces against Mohammad Khatami were so strong that he was unsuccessful in many of his goals. The people who voted for him became disappointed, and many middle class voters did not participate in the presidential election in 2005 (Maloney, 2015). This move resulted in the presidency of Ahmadinjead, who was a hardliner who supported the Supreme Leader. He had populist economic policies and started to close the political atmosphere and push back on civil society.
28 His policies were not in favor of the middle class and his reelection was met with backlash and riots by the middle classes in Tehran, which had been cracked down on. In 2013, when his term finished, Hassan Rouhani, a moderate figure was chosen as president and his government is still in power (Fakhraei, 2015).
Political System in Iran
The system of politics in Iran is named the Islamic Republic and rests on two core principles, Islam and Republicanism, which regulate all the institutions in the state. In the constitution of Iran, article number one states this system is based on the “belief” and article number six indicates the country should be governed based on public opinion and vote through elections. These include the election of the President, members of parliament, members of boards and other such institutions, or a referendum in cases of other principles.
The Islamic Republic of Iran, like many other states in the world, has three top branches, the parliament, executives, and judiciary; however, unlike other countries, all three of these branches have to work under the ruling of a supreme leader. Article 57 states that the branches must “operate under the absolute rule of the Imam (supreme leader) according to Forthcoming articles of this Constitution; these branches are independent of one another.”
29 The supreme leader is a mufti, who is chosen by the votes of experts, and these experts are elected directly by the people. The experts would review and consult among themselves concerning all the fuqaha'(group of muftis) possessing the qualifications specified in Articles 5 and 109”. As is stated in Article 110, a supreme leader’s main responsibilities are determined by the general policies of the Islamic Republic of Iran after consultation with the Expediency Council and include supervising the general policies of the system, the Command referendum, Command of the Armed Forces, war and peace and mobilization, resolving differences between the three wings of the armed forces and regulation of their relations, and solving the problems which cannot be solved by conventional methods.
Assigning, discharging, and approving of the resignation of lower positions is part of the responsibilities of a supreme leader: A.) six Mufti for the Guardian Council. B.) Head of the judiciary. C.) The head of the Islamic Republic of Iran Broadcasting. D.) The Chairman of the Joint Chiefs of Staff E.) the chief commander of the Islamic Revolution Guards Corps. F.) the chief commanders of the Islamic Republic Army.
An Assembly of Experts, who are responsible for choosing a leader, is elected by the people from candidates who are approved by the Guardian Council, as is stated in Article 109: “The law sets out the number and qualifications of the experts, the mode of their election, and the code of procedures regulating the sessions during the first term. All these are drawn up by the fuqaha' on the first Guardian Council then passed by votes from the majority and then finally approved by the Leader of the Revolution.”
There are two other institutions, which work under the supreme leader to help the state to be Islamic. One is the Guardian Council, which has the duty “to safeguard the Islamic ordinances and the Constitution” and has 12 people as its members; the Islamic Consultative Assembly elects six expert clergies (mufti) chosen by the leader and the remaining six are jurists, specializing in different areas of law from among the Muslim jurists nominated by the Head of the Judicial Power.
As mentioned in Article 94, “All legislation passed by the Islamic Consultative Assembly must be forwarded to the Guardian Council. The Guardian Council must review them to be compatible with the criteria of Islam and the Constitution. In Article 99 states that “the Guardian Council is
30 responsible for supervising the elections o f the Assembly of Experts for Leadership, the President of the Republic, the Islamic Consultative Assembly, and the direct recourse to popular opinion and referenda. The second institute is the Nation's Exigency Council which shall meet at any time the Guardian Council judges proposes a bill of the Islamic Consultative Assembly to be against the principles of Shariah or the constitution, and when the Assembly is unable to meet the expectations of the Guardian Council”.
After the 1979 revolution, the electio n was successful in forming legislation and executive branches, but these changes did not transform Iran from a full authoritarian system to a full democracy. However, it did make the system somewhat less authoritarian and somewhat more democratic. The reason behind it this the duality, which has been enshrined in the constitution. The supreme leader has the power to rule and through the Guardian Council, he controls the variance of candidates in elections. Further, there are other powerful forces, such as foundations, the army, and the revolutionary guards, which he controls to ensure that the balance of power will never shift away from him and toward elected institutions like the presidency and the parliament.
On the other hand, these elected institutions prevent the supreme leader from wielding the same power that the Shah had before the revolution. Because of the checks provided by social classes and political blocks, no one, neither the President nor the supreme leader, could claim absolute power.
31 Finding and Analysis
Democracy
There are two important sets of data on the matter of the relationship between democracy and oil rent. The democracy data comes from polity, and is shown in figure 1. The graph illustrates Iran’s different scores over time.
Figure 1
The mean Iranian democracy score is -6. Since 1953 coup against Dr. Mossadegh government until 1979 revolution Iran was a full authoritative regime with -10. After the revolution, the new Iranian regime’s score in democracy increased to -6, and then continued to rise until the Presidential election of 1977. During this period Iran experienced its best democratic rating of
32 +3, but from 2005, and the choosing of Ahmadinejad as President, Iran’s score fell to -6 and after the 2009 election, dropped further to -7.
This graph shows Iran has different scores over time, but to understand this graph better, it is helpful to compare it with some other countries. To do this comparison I chose four countries: Turkey, Pakistan, Saudi Arabia, and United Arab Emirate.
Countries such as Saudi Arabia, with a consistent score of –10, and the United Arab Emirates, scoring -8, highlight a disparity when compared to countries like Turkey or Pakistan, who score differently over time. This show’s how different countries are, in their path towards, and in struggling for, democracy. It can, therefore, be concluded that Iran’s data shows a progression towards democracy over time, and that their struggle is meaningful.
33 Oil Rent
The other important factor is oil rent over time. Iran, based on the World Bank data as shown in figure 2, illustrates a fluctuating percentage of oil share in GDP.
Figure 2
This graph shows Iran oil rent in 1973 rose dramatically. The rate of oil rent in Iran in 1970 was roughly 0.073% and by 1973 Iran is 0.304%. This score then suddenly rises up to 30.648% in 1974. After the first shock, the rate of oil rent gradually declined. For example, in 1975 it had sunk to 24.002% and by 1976, 23.244%. In 1979, the year of the revolution, oil rent jumps again to its highest score in history, peaking at 31.858%. after that, during the years of war, Iran oil rent declined gradually and dramatically. Again, from 1988, Iran’s oil rent climbed 7.371% to 20.064% in 1990. After its jump in 1990, it gradually declined to 16.775% in 1997, before dramatically declining to 9.755% by 1998. It once again recovers in 1999 with 15.549%, and dramatically rises in 2000 to 30.253%. Iran’s oil rent drops to about 20% in 2001 and 2003 and
34 rises again to 30.243% and 31.098% in 2005 and 2006 respectively. In 2007 it declines to 25.693%, before rising again to 29.424% in 2008. In 2009, it drops to 16.19% and goes to 19.362% and 23.323% in 2010 and 2011, respectively. In 2012 and 2013, Iran’s oil rent was 16.615% and 20.182% respectively.
These figures and numbers are showing how Iran’s oil rent has had ups and downs during the last 50 years. Under different administrations, Iran scores differently based on oil production rate, differences in the oil market and domestic production. The question could be asked, here, is the impact of this oil rent on the different administration policy.
Comparison between the oil rent and rate of democracy shows that in Iran there is not necessarily a direct correlation. When Iran’s oil rent was nearly peaking in 1974, the score in democracy was -10. This means Iran was an absolute authoritative state. In that era, Iran’s rate of oil rent was 30.648%. Another high score of oil rent was in 2000. In that year, Iran scored +3 in democratic rating, one of the best scores in Iran’s struggle for democracy.
Other interesting differences could be recognized between the eras. Iran’s rate of oil rent changes under different administrations, but Iran’s score of democracy is almost relatively cons istent, unrelated to oil rent rate. Iran’s democracy score in the Rafsanjani era, (from 1989 until 1997) remained on -6 while at the same time Iran’s oil rent was at its lowest point at 13.362% and at its highest reached 26.217%. In the Khatami era, 1997 until 2005, Iran’s democracy rating was +3, yet experienced massive differences in oil rate, from the lowest of 9.775% to highs of 30.253%. In the Ahmadinejad era, (2005-2013) Iran’s democracy rate was -6 and below. During this period, his administration experienced oil rent lows and highs from 16.19% to 31.098% respectively.
Political Economy of oil rent in Iran before and afte r the revolution
To find out what is the relevance of oil rent and democratic practices, it is imperative to look at historical facts and reports in these different eras. Before the revolution, irrespective of who the prime minister was, Iran had one leader and that was the Shah himself. To understand the effect of oil on policies and oil indexes, it is necessary to go beyond the oil price shock of 1973, when
