3: Oil, State, Power and Economy

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The Iranian economy has undergone significant transformations since 1945 when the state embarked on a project of major development. The role of energy in this process has been fundamental, but also the subject of much debate and discussion due to the nature of development and the role of the state. Although oil extraction started at the beginning of the 20th century, revenues only began to influence the economy after the Anglo-Persion Oil Company (APOC) began production in 1908 (yergin, 1991). Oil income paved the way for the integration of Iran’s economy into the global system as well as the political transformations of subsequent decades. It also greatly enhanced Iran’s geopolitical importance, making it a centre of attention for the great powers, especially after the Second World War.

Since the Second World War, the great powers have concurred that Middle Eastern oil must be accessible in the interests of the stability of the global economy, regardless of competition. With the transformation of the world economy since the Second World War, the emergence of the Gulf countries (including Iran) with both huge oil and gas reserves and cash flow for global investment have made them vital actors in the global system (Hanieh, 2011). In addition, the rise of China and India as world economic powers has made the importance of the oil-producing countries even more significant.

The impact of energy on the Iranian political economy has gone through several economic and political phases. The 1950s saw the growth of nationalism and anti-imperialist sentiment in Iran, led by Prime Minister Mohammad Mosaddegh, who called for nationalization of the oil industry.

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