agriculture historically was the most valuable area of Iran’s economy, its share of the gross domestic product (GDP) has been declining since the 1930s due to the rise of manufacturing. Meanwhile, the mining sector, which is controlled by the production of oil, has grown rapidly since Iran nationalized its oil fields in the 1950s. Factory manufacturing has experienced times of both rapid growth and stagnation. Trade and commerce activities have expanded with the nation's increasing urbanization. During the late 1970s the Iranian economy appeared ready to grow to a level on par with the world’s developed countries, but the 1979 revolution and the consequent eight-year war with Iraq strained all economic sectors. the need to produce for the war effort actually spurred industrialization, as did government spending on infrastructure development.

Planned economic development, initiated in 1949, was terminated in 1978 and revived in 1982, but Iran's involvement in war with Iraq impeded progress. The management of the economy under the republic is subject to Islamic criteria as determined by the Council of Guardians and approved by the legislature. The constitution of 1979 establishes specific guidelines for the administration of the nation's economic and financial affairs.The economy is separated into three sectors: public, which includes major industries, banks, insurance companies, utilities, communications, foreign trade, and mass transportation; cooperative, which includes production and distribution of goods and services; and private, which consists of all activities that supplement the first two sectors.

Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. President KHATAMI has continued to follow the market reform plans of former President RAFSANJANI and has suggested that he will pursue diversification of Iran's oil-reliant economy although he has made little progress toward that goal. The strong oil market in 1996 helped ease financial pressures on Iran and allowed for Tehran's timely debt service payments. Iran's financial situation tightened in 1997 and deteriorated further in 1998 because of lower oil prices. The consequent zoom in oil prices in 1999-2000 afforded Iran fiscal breathing room but does not solve Iran's structural economic problems, including the promotement of foreign investment.