Total domestic energy subsidies total $20 billion to $30 billion a year, Takin said.
"These subsidies are now costing the government roughly 15% of Iran's GDP. That should knock you over. That's a mind-boggling number," said Hossein Askari, professor of international business at George Washington University. "And the nub of the problem is that if you were to cut the subsidies, I think there would be riots in the streets."
Iran could be reinvesting in the oil and gas infrastructure, and it is to a degree, but Ahmadinejad also has diverted billions of dollars in oil revenue to social welfare programs, major infrastructure building programs in neighboring countries such as Afghanistan and importation of consumer products -- to the consternation of many of those in his government.
Foreign investment
The heavy lifting in recent years has been left to foreign oil companies, which in the 1990s began working in Iran in substantial numbers for the first time since the Islamic Revolution.
U.S. sanctions in place since the seizure of the American Embassy in Tehran in 1979 have prevented U.S.-based oil companies from operating in Iran, but companies such as Royal Dutch Shell, France's Total and Italy's Eni have invested, some heavily, despite on-again, off-again threats by Washington to pursue sanctions against foreign companies under U.S. laws.
To a great degree, though, Iran has created its own woes by dragging out contract negotiations and offering only skimpy paybacks to foreign oil companies interested in building new production, industry analysts say.
"People have said that even with sanctions and all the rest, if Iranians want investment in their oil industry, what they need to do is offer decent terms, and whatever the sanctions, they would have companies flooding in," said one Western oil company official, who spoke on condition of anonymity.
"But the issue for us at this point is both political and commercial. The state of the country is such that it's just not the right time to be there."
That is the message Washington is trying to reinforce. For years, U.S. sanctions prohibited investments of more than $20 million in Iran's oil industry, but in practice, they were applied only to U.S.-based oil companies. But as the nuclear showdown has unfolded, and as it became clear the U.N. sanctions would not impose serious economic penalties on Iran, Bush administration officials decided on a different tack.
