Deflated by Oil Price's Dive

In Iran, accusations are flying about how much President Mahmoud Ahmadinejad has been spending from the foreign exchange reserves fund, which contained about $40 billion when he was elected president in 2005. The fund could have been a source of economic strength now, when plunging oil prices are compounding problems of international sanctions, the credit crisis, domestic inflation and capital flight.

The oil windfall over the past year ought to have brought the fund up to $130 billion, according to calculations by the Iranian newspaper Ettemaad-e Melli, which is critical of the government. Instead, said Tahmasb Mazaheri, the recently ousted head of Iran's central bank, the government has been "looting" the nation's assets in order to pump up growth while letting inflation soar to about 30 percent.

The new head of Iran's central bank, Mahmoud Bahmani, has warned of hardships. "In recent months oil has dropped to $70, and this has affected all the economic decisions of countries whose budget depends on oil," he said.

"When the money comes in, there are fewer worries. But this drop in income will be a major shock," Morteza Allahdad, a U.S.-educated economist at the Iranian central bank, said. "Unfortunately, we don't know how much money is left in the foreign currency exchange fund to absorb this."

Ahmadinejad has refused to reveal how much is in the fund, saying the account's balance is "a secret."

In Venezuela, President Hugo Chávez has cast the economic meltdown as a sign of American-style capitalism's failure and said that Venezuela, with its $40 billion in central bank reserves, is well-prepared to weather the storm.

"Venezuela has the conditions to bear any oil price, it is not vital for us," Chávez said recently, recalling the early months of his presidency, when prices were low. He added that if oil stabilizes at $80, Venezuela's economy would be stable.

In 2000, a year after Chávez took office, the price Venezuela needed to pay for imports was $34 a barrel. Then, the jump in oil prices -- particularly in the past two years -- gave Chávez the money to pledge billions to overseas projects while increasing social spending at home. That spending has helped maintain Chávez's popularity just below 60 percent as the government prepares for state and municipal elections in November.

"For the last five years, an ever-increasing oil revenue has allowed government to spend both at the same time at home and abroad," said Rámon Espinasa, former chief economist at the state oil company and now an energy consultant for the Inter-American Development Bank. "For the first time, it will have to choose what to prioritize."

Russia is better prepared for falling oil prices than Venezuela or Iran because Prime Minister Vladimir Putin as president taxed oil profits, paid off almost all the government's debts and accumulated more than $530 billion in foreign currency reserves, the third-largest in the world. But the country's corporate sector has borrowed nearly $500 billion.

Although Russia's benchmark Urals crude dropped to $65 a barrel last week, the Kremlin says the price would have to stay depressed for years to affect its budget, which assumes an average price of about $70 a barrel. Finance Minister Alexei Kudrin recently told reporters that even if oil fell as low as $40 to $50 a barrel the government could maintain spending for three years.

"Our economy is rather well prepared for lengthy external shocks," Putin said in televised remarks at a government meeting last week. "We have one of the world's highest rates of gross national savings. Thus, we will largely fund the development of our economy with domestic resources."