Battle in Iran over foreign role in its oil wealth

TEHERAN • A political battle is taking shape in Iran over any new foreign role in developing the country's enormous oil wealth, only a few weeks after the Iranian nuclear deal with foreign powers relaxed tough economic sanctions.

The battle pits hardliners, including some who opposed the nuclear deal, against moderates aligned with President Hassan Rouhani, who has touted that deal as denoting a new economic era for Iran. Already the battle is threatening to complicate efforts to bring in much-needed foreign investment for Iran's outdated oil industry, which remains a critical source of revenue for the country.

On Saturday, hardline students gathered in front of the Oil Ministry in Teheran to protest against the terms of a proposed contract that would permit foreign oil companies to help revitalise outdated wells and infrastructure. The proposal amounted to "the plundering of national wealth", the students shouted.

At the same time, new doubts have arisen about a conference organised by the Oil Ministry scheduled for this month in London, where the contract was to be presented. A ministry official was quoted on Saturday by Seda, an Iranian magazine, as saying that the conference had been cancelled.

The official, Mr Ali Kardor, deputy head of the national oil company, was quoted as saying there was no need for such a conference because bidding by foreign oil companies would be held in May. But he also suggested that the conference had been cancelled because Iranian participants had faced problems obtaining visas to attend. It remains unclear precisely why the conference was cancelled. It had been announced and postponed four times, hinting at disagreements over the terms.

The protests in front of the Oil Ministry appear to have originated partly over anger at Dr Rouhani's trip last week to Italy and France where he signed a memorandum of understanding with the French firm Total to export up to 200,000 barrels of Iranian crude oil a day, the first deal following the lifting of the sanctions.

The lifting of the sanctions on Jan 16 allows oil majors to return to Iran where they had all long been active before sanctions started biting in 2012.

Iran's oil industry needs around US$150 billion (S$214 billion) in investments, industry experts have estimated. The lifting of the sanctions on Jan 16 allows oil majors such as Anglo-Dutch Shell, Total, Spain's Repsol and ENI of Italy to return to Iran where they had all long been active before sanctions started biting in 2012. US oil companies are banned under US law from working in Iran.

The proposed contract for foreign oil companies, known as the Iran Petroleum Contract, is meant to replace older contracts that industry officials regard as obsolete. Under the proposal, outside oil companies would gain rights to a set percentage of Iran's enormous oil reserves for 20 or 25 years.

Who owns the oil is an especially sensitive subject in Iran, where Britain controlled almost all crude in the first half of the last century, paying Iranian rulers next to nothing in return.

In 1953, the country's first democratically chosen prime minister, Dr Mohammad Mossadegh, nationalised the country's oil industry, angering the British who in turn encouraged the United States to organise a coup d'etat in Iran. Dr Mossadegh was ousted from power, but Britain never regained control of Iran's crude.


A version of this article appeared in the print edition of The Straits Times on February 02, 2016, with the headline 'Battle in Iran over foreign role in its oil wealth'. Print Edition | Subscribe