Iran is OPEC's second-largest oil producer, with average 1998 crude oil production of 3.6 million bbl/d. Iran's current sustainable production capacity is estimated as high as 4 million bbl/d, but this figure is controversial since Iran may have maintained production levels at some older fields only by using methods which have permanently damaged the fields. In December 1997, Oil Minister Zanganeh stated that the country aimed to boost oil production capacity 200,000-250,000 bbl/d each year, possibly surpassing 6 million bbl/d by 2010. Some observers are skeptical about whether this goal, which would nearly restore the country's production capacity of the mid-1970s, is possible.

In any case, Iran's actual production is limited by OPEC policy. In June 1998, Iran agreed to reduce its production by 305,000 bbl/d. According to OPEC, this cut was to be implemented from a base production level of 3.623 million bbl/d, which would bring Iran's production quota to 3.318 million bbl/d. Iran disagreed, claiming that the cut in production should be based on a higher output level of 3.94 million bbl/d, which was established at the 1997 OPEC meeting in Jakarta. In March 1999, Iran and other OPEC countries (led by Saudi Arabia) reportedly resolved this dispute by accepting Iran's higher baseline figure. Iran agreed to a further cut of 7.3%, or 264,000 bbl/d, within the framework of a new round of OPEC production cuts finalized on March 23. As of April 1, 1999, Iran's new production quota was set at 3.359 million bbl/d.