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Originally published Wednesday, January 16, 2013 at 5:22 AM

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Iran president: Sanctions fight requires oil shift

President Mahmoud Ahmadinejad said Wednesday Iran must move away from dependence on oil revenue to overcome Western sanctions that have slowed the economy and disrupted foreign trade.

Associated Press

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TEHRAN, Iran —

President Mahmoud Ahmadinejad said Wednesday Iran must move away from dependence on oil revenue to overcome Western sanctions that have slowed the economy and disrupted foreign trade.

Many Iranian officials have described the Islamic Republic's reliance on crude oil exports as a weakness, but Ahmadinejad's call before parliament highlights the political will to try to broaden Iran's economy. It also represents the first major acknowledgment by Ahmadinejad that the economic squeeze from sanctions demands "structural changes" in Iran's industries and exports.

Tehran had long counted on crude oil sales as the backbone of the nation's economy, accounting for about 80 percent of foreign currency income. But Western sanctions over Iran's nuclear program have targeted oil exports and shut Iran out of the international banking system, making it hard for its remaining customers in Asia and elsewhere to pay.

Speaking to lawmakers, Ahmadinejad said "enemies" are using the weak points in Iran's economy to pressure the country. Iranian authorities have accused the West of waging an "economic war."

Iran's Supreme Leader Ayatollah Ali Khamenei insisted sanctions will not succeed.

"The arrogance front (U.S. and its allies) have employed all their might to force the Iranian nation through sanctions and pressures to surrender. But this nation will tolerate the hardships because it has recognized enemy plans, tactics and strategy," Khamenei said Wednesday, according to Iran's state TV.

The U.S. and its allies fear Iran may ultimately be able to develop nuclear weapons. Tehran denies the charges, saying its nuclear program is peaceful and aimed at generating electricity and producing radioisotopes to treat cancer patients.

"We need to cut reliance on petrodollars in the government's spending budget," Ahmadinejad told lawmakers. We have to finish this once and for all."

In a clear admission of the blow from sanctions, Gholam Reza Kateb, head of the parliament's budget committee, said Iran's revenues from oil and gas exports have dropped by 45 percent.

The Iranian government is preparing to present an austerity budget to parliament for the next Iranian calendar year that begins March 21. It would substantially increase income taxes as a way of avoiding a budget deficit.

Instead of oil money, Ahmadinejad said natural resources such as mines and wood should be used to generate income.

"We have to change the flow of wealth and capital into the country. Problems will remain as long as this doesn't change ... 25 percent of gross national product is concentrated in Tehran. We need to make sure that the money is invested not just in one city but all over the country," Ahmadinejad said.

Ahmadinejad also said Iran must further cut government subsidies on energy, which give Iranians some of the cheapest fuel in the world. Parliament has opposed the move, saying it will boost already double-digit inflation.

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