In a world where natural resources are often seen as a ticket to prosperity, countries like Iran and Venezuela stand as stark contradictions. Both nations sit atop vast oil reserves—Iran ranks fourth globally with over 200 billion barrels, while Venezuela boasts the world’s largest proven reserves at around 300 billion barrels. Yet, despite this underground wealth, significant portions of their populations live in poverty. In Iran, recent estimates indicate that over a third of the population, or approximately 30-40 million people, live below the poverty line as of 2025. In Venezuela, poverty rates hover around 50-80%, depending on the measurement, with extreme poverty affecting more than half the population in recent years. This phenomenon, known as the “resource curse,” highlights how abundance in commodities like oil can lead to economic stagnation, inequality, and social unrest rather than broad-based development.
Understanding the Resource Curse
The resource curse, also called the paradox of plenty, refers to the tendency of resource-rich countries to experience slower economic growth, higher corruption, and greater inequality compared to resource-poor nations. Several mechanisms drive this:
- Dutch Disease: Heavy reliance on resource exports inflates the local currency, making other sectors like manufacturing and agriculture less competitive internationally. This leads to deindustrialization and job losses in non-resource industries.
- Volatility in Commodity Prices: Oil prices fluctuate wildly, causing boom-and-bust cycles that destabilize budgets and economies.
- Institutional Weaknesses: Resource revenues often foster corruption, rent-seeking behavior, and weak governance, as governments rely on exports rather than taxes, reducing accountability to citizens.
- Debt Accumulation: During booms, countries borrow heavily, assuming high prices will persist, only to face crises when prices drop.
Examples abound beyond Iran and Venezuela, including Nigeria and Libya, where similar issues have perpetuated poverty despite oil wealth.
Venezuela: From Oil Boom to Economic Collapse
Venezuela’s story is a textbook case of the resource curse amplified by policy failures. Once Latin America’s richest country per capita in the 1970s, Venezuela’s economy has contracted by over 75% since 2013, with hyperinflation reaching millions of percent at its peak. Key factors include:
- Overdependence on Oil: Oil accounts for over 95% of export earnings, leaving the economy vulnerable to price swings. When prices plummeted in 2014, revenues dried up, exacerbating shortages of food and medicine.
- Mismanagement and Corruption: Under Presidents Hugo Chávez and Nicolás Maduro, the state oil company PDVSA was used as a political tool, funding social programs without diversification. Corruption siphoned billions, while underinvestment led to declining production—from 3 million barrels per day in the early 2000s to under 1 million today.
- U.S. Sanctions and Isolation: Imposed since 2017, sanctions have restricted access to international markets and technology, further crippling oil output and the economy.
- Social Inequality: Despite initial poverty reductions through oil-funded welfare, extreme inequality persisted, and the collapse reversed gains, pushing millions into destitution.
As a result, Venezuela’s poverty rate, which fell to around 25% in the early 2010s, has surged, with recent surveys showing over 78% in monetary poverty as of 2025.
Iran: Sanctions, Mismanagement, and Structural Flaws
Iran, with its massive oil and gas reserves, faces a similar but distinct set of challenges. The country’s economy has been hampered by decades of international isolation, internal policies, and regional conflicts, leading to persistent poverty despite resource wealth.
- International Sanctions: U.S. and UN sanctions, reimposed in 2018 after the U.S. withdrawal from the nuclear deal, have slashed oil exports from 2.5 million barrels per day to under 1 million, costing billions in lost revenue. This has fueled inflation, unemployment, and a black market economy.
- Corruption and Economic Mismanagement: Widespread corruption diverts oil revenues to elites and military spending rather than public services. Inefficient subsidies, particularly on energy, drain the budget—Iran subsidizes fuel at rates that encourage smuggling and waste.
- Lack of Diversification: Like Venezuela, Iran’s economy is oil-dependent, with exports comprising 60-70% of government revenue. Efforts to diversify have been stymied by sanctions and poor policy reforms.
- Rural-Urban Divide and Inequality: Poverty is exacerbated by disparities between urban centers and rural areas, where access to education and jobs is limited.
These issues have pushed Iran’s poverty rate to around 36% in 2023, with projections holding steady into 2025 amid ongoing economic pressures.
Common Threads and Broader Implications
Both countries share overlapping problems: heavy oil reliance, corruption, and external pressures like sanctions. In Venezuela, socialist policies initially masked inequalities but ultimately amplified them through mismanagement. In Iran, theocratic governance and geopolitical tensions have prioritized ideology and defense over economic reform. The result is a vicious cycle where resource wealth funds short-term gains or elite interests, leaving the masses impoverished.
Critics argue that authoritarian structures in both nations reduce transparency and stifle innovation, perpetuating the curse. However, not all resource-rich countries suffer this fate—nations like Norway have avoided it through strong institutions, sovereign wealth funds, and diversification.
Conclusion: Breaking the Curse
The cases of Iran and Venezuela underscore that natural resources alone do not guarantee prosperity; effective governance, diversification, and international cooperation are essential. Without addressing corruption, volatility, and external constraints, these nations risk continued poverty amid plenty. For policymakers worldwide, the lesson is clear: wealth from the ground must be managed to uplift people, not entrench inequality. As global energy transitions accelerate, the window for reform may be closing, making urgent action imperative for a more equitable future.