bit REVENUE AND THE MILITARISATION OF IRAN 8$ on development plans, (b) to have investment abroad in whatever form, including real estate and commerce, and (c) to have large-scale military expenditure. In fact all three figured in subsequent attempts by Iran to absorb the revenue from oil. However, the emphasis gradually emerged to be on the third avenue for the following reasons. The size of development plans has an inherent relation with the size of the economic base of the country and also its level of infrastructure, skill and the tradition of technology absorption. Given these other factors, development plans of even the maximal size that were feasible, failed to absorb the huge oil revenues flowing in since 1973. Investment abroad was likewise limited to real estate and currency investments of a speculative nature, constrained by the lack of a culture of real investment among the currently affluent classes. Large scale militarisation thus almost automatically became the favourite choice of the regime, and particularly so because of the extremely high rate of built-in technological obsolescence of today's military wares and expertise. Ironically, the question, what is the optimal size of oil production for Iran given its economic and other parameters, was never asked. The production of oil which was around 5 million barrels/day before 1973 shot upto 6 million barrels/day, on the average, after the price hike which took prices from $ 4/barrel to $ 16/barrel. The production of oil and the revenue generated, were, as it were, taken as parameters and the exercise was to find out how best to absorb it. Oil production plan was never sought to be derived from an exercise on the best course of economic development of this country. The results of course are well known. The country developed a costly military structure at the expense of a healthy development plan and the persisted even when there were dwindling oil revenues. The cost of militarisation in this connection is to be reckoned not only in terms of the current dollar outlay on arms, but also the new forces and tensions that militarisation itself introduced both within the country and in the international geo-politics which finally resulted in dramatic developments in the region in 1979-80. Military Expenditures Military expenditure of Iran before 1953 was not very significant, and only after the coup against the government of Dr. Mossadeq, it increased rapidly. Two major factors contributed to this development: First of all, the suppression of the internal opposition to the Shah, as well to pave the way for peaceful implementation of the Land Reform, and secondly the CENTO military treaty which was signed by Iran, Iraq, Pakistan, Turkey, USA and England in 1959. The latter was designed to join the NATO member chain to the SE ^TO military treaty. Iran, by and large, bought its new military equipment after 1964-65. Not only had its oil revenue increased but it no longer had to pay out about $ 100 million per year that it had to pay since 1954 as compensation to oil companies