Iran is OPEC's second largest oil producer and holds 10% of the world's proven oil reserves. It also has the world's second largest natural gas reserves (after Russia). GENERAL BACKGROUND Iran's economy, which relies heavily on oil export revenues (around 80% of total export earnings, 40%-50% of the government budget, and 10%-20% of GDP), was hit hard by the plunge in oil prices during 1998 and early 1999, but with the rebound in oil prices since then, has recovered to a great degree. For 2003, Iran's real GDP grew by around 4.5%; for 2004 it is expected to grow at slightly slower, but still healthy, 4.4% rate.