Recovering from an embarrassing summer "energy crisis" that led to a Cabinet reshuffle and caused heavy industrial losses. Iran is taking steps to promote better management, slower growth and fiscal austerity.
Throughout the summer, power failures blacked out oil-rich Iran for up to six hours a day and cut industrial production in half. The crisis was caused not by lack of fuel but by failure to build enough electrical generating capacity to keep pace with demand that has been growing 20 per cent a year. As more people can afford air conditioners and refrigerators, they compete with industry for the limited power supply.
The government blamed the blackouts on failures by foreign contractors working on key power projects. Iranian industrialists, however, tended to cite government planning that pushed construction of power stations while neglecting such related facilities as transmission lines.
With the onset of cooler weather, the blackouts in Tehran have practically ceased, but the provinces still suffer.
The power failures were the main factor that provoked Shah Mohammed Reza Pahlavi to call in a new government on Aug. 6. The former prime minister, Amir Abbas Hoveica was named court minister, a largely ceremonial post above the Cabinet level in royal protocol. To replace the affable Hoveida, the shah named Jamshid Amouzegar, and American-educated technocrat as Iran's chief oil negotiator.
Referring to his tough advocacy of higher oil prices, which often brought him into conflict with U.S. diplomacy, a political observer in Tehran said, "Amouzegar can be a hard-nosed, flinty S.O.B., but he's basically committed to Western values. He's a nationalist, but he has the values of a Western technocratic society."
More than half of the 22 Cabinet posts changed hands in the shuffle. Like Amouzegar, most of the newcomers are Western-educated technocrats.
"Hoveida had been around for 12 years, the economy was in a mess, the Shah was piqued by his ministers over the energy crisis, and it was time for a change," a diplomat said in summing up the moves. "But nobody really got sent to Siberia."
Characterizing the Shah's new administration, an incoming Cabinet minister said Amouzegar is "by nature inclined to austerity and fighting against excess spending, "In drawing up the 1978-83 five-year plan, the new team will give priority to unfinished projects of the (current) plan and a more balanced rate of growth," he said.
Following the 1973 oil boom, Iran spent intensively to industrialize and its economic growth rate soared above 30 per cent. Bottlenecks soon developed, however, and last year's rate fell to 13.5 per cent. This year, the increase was forecast at 8 per cent, but because of the crisis this summer it is not expected to exceed 6 per cent.
Even before the summer energy crisis, Iran's industrialization projects were lagging because of infrastructure, labor and productivity problems. Although demand is high, a recent government study found that use of existing capacity was 60 per cent or less in the automobile, tractor manufacturing and textiles industries.