Seeking to reduce political and economic discontent, Shah Mohammed Reza Pahlavi is sacrificing pet projects ranging from museums to sophisticated U.S. military hardware as he reins in his ambition to make Iran one of the world's top nations by the year 2,000.
Although the Shah is reliably reported to have been the last to accept the sacrifices, Western economists believe many were in order even before the humilitating recent strikes that brought them on.
Both foreign and Iranian economists - as well as the local political opposition - long have questioned the wisdom of a policy once called "giving the Shah everything he wants" in the way of prestigious but often unproductive purchases.
The belt-tightening marks the first time since the oil boom of the early 1970s that the Shah has cut back on expenditures for such things as arms and nuclear power in favor of outlays for housing, pay raises for public employes and other social purposes.
The cutbacks became official policy only when the government had to find funds to meet wage demands generated by the wave of theoretically illegal strikes that began last month and shows no sign of abating.
Finance Minister Mohammed Yegeneh, in an interview, estimated the added costs of an across-the-board 25 percent wage increase for about 600,000 government workers - half paid now, half next spring - at $4.5 billion. Many economists believe the additional outlays could be even higher.
They note that virtually without negotiation, state organizations such as the state telecommunications company and the nationalized oil corporation have granted wage increases ranging from 70 to well over 100 percent and have also agreed to costly housing subsidies.
Moreover, wages in the private sector, traditionally higher, have increased to keep pace with the rise in the public sector. And private sector strikes are spreading.
Yet as early as last spring, in an effort to counter political discontent through spending, the government increased outlays by 23 percent and ran up a $5.5 billion deficit.
"The day of reckoning has come," a western economist said, predicting that inflation is heading back toward last year's 30 percent range and possibly even higher.
"Next year is going to be hell, he said. "The tremor is going to have to be absorbed then."
"The way we're headed, the country will be bankrupt in six months," a close confidant of the Shah said. "Now we are 20 years behind - back where we started.
Such talk is considered alarmist, for Iran still enjoys excellent credit in international money markets, husbands $10.7 billion in foreign exchange reserves and can count on oil revenues of $22 billion to $23 billion.
Finance Minister Yegeneh estimated capital flight since the political turmoil turned serious in the spring at $1 billion. Economists believe half that total left the country in September, following imposition of martial law and the armys shooting of more than 100 civilians in Tehran.
Yegeneh's most serious problem is achieving immediate savings. He conceded he would be "very glad" if he could cut government expenditures by 15 to 20 percent this year and said the cutbacks "may have little impact" before the current Iranian year ends next March.
Although the government has announced no cutback of previously signed commitments - despite newspaper reports here to the contrary - Yegeneh suggested the ax would fall less on projects at an "advanced degree of implementation" than on future deals.
But almost everything else is "under reconsideration," he said, while stressing the cutbacks are "not to affect defense capabilities."
Prime targets for the tax are futre outlays for nuclear power plants, American military aircraft, Genman and Dutch surface vessels and American construction projects for an ambitious navy port.
Symptomatic of the policy was an announcement in Washington last week canceling the shah's plans to buy 70 more Gruman F14 warplanes to complete a fleet of 80 he is committed to buying.
Another cancellation considered virtually certain involves purchase of more F16s. In U.S. fiscal year 1977 Iran paid $3.2 billion for 160 F16S, the biggest single aircraft purchase ever.
But despite Iranian suggestions that seven AWACS aircraft may be chopped, American officials believe the $1.2 billion order for these airborne radar and air defense systems is not endangered.
Iranian purchases of American military equipment have been so enormous in recent years - $5.4 billion in fiscal year 1977 and $2.6 billion in fiscal 1978 - that little more than $1 billion, mostly for spare parts, was expected to be acquired until the current fiscal year ends next September.
American government ambivalence regarding the shah's military purchases is illustrated by the Carter administration's arms sales restriction policy and the knowledge that, thanks to military exports, an otherwise unfavorable trade balance last year turned out $6.4 billion dollars to $3.6 billion dollars in Washington's favor.
The shah's ambitious and controversial nuclear policy, which was aimed at having half of Iran's power provided by about 20 plants producing 23,000 megawatts by 1993, now appears limited to the first two French and two West German projects already under construction.
Each new 1,000-megawatt nuclear plant costs more than $2 billion, two to three times more than in the west because of insufficient infrastructure here.