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Iran: Role of the Government
Country Study > Chapter 3 > The Economy > Role of the Government


The central economic role of government in post-World War II Iran has been the manipulation and allocation of oil revenues. Since the beginning of the production of petroleum in commercial quantities in the 1920s, government oil policies have reflected the varying priorities of the different regimes and have exacerbated economic and cultural cleavages within the society.

During the reign of Reza Shah (1925-41), oil revenues were modest, and most of the proceeds from oil went to Britain through the Anglo- Iranian Oil Company (AIOC). For its revenues, the regime relied upon indirect taxes (customs duties and excise taxes) on items such as tea and sugar. In contrast, after 1951, the government of Mohammad Reza Shah (1941-79) relied on oil income to finance the policies of centralization by which it was able to control most aspects of Iranian society until nearly the end of the shah's rule.

Reza Shah's regime financed its development programs through modest oil royalties, customs revenues, personal income taxes, and state monopolies. During his reign, oil production royalties, although still low, quadrupled in terms of the rial (for value of the rial -- see Glossary); this money was spent on defense and industrial development. Between 1926 and 1941, higher tariffs boosted annual customs revenues from approximately US$5.6 million to US$16.3 million. Institution of a small income tax replaced the local levies and enabled the government to extend its influence into the provinces; by 1941 the income tax provided annual revenues of US$10.8 million. Finally, the government relied upon state monopolies on consumer goods such as sugar, tobacco, tea, and fuel, which contributed approximately US$46.5 million annually by the early 1940s.

Data as of December 1987

Last Updated: December 1987

Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Iran was first published in 1987. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on

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