Cancellation of Oil Contracts Conference Indicates Factional Disputes within Iranian Government

The cancellation of a conference where Iran was to present its plans for foreign investment in the oil industry indicates that factional disputes are disrupting the advancement of energy sector revival projects in the country. According to Reuters, Iran announced that the reason for the cancellation was a problem in obtaining UK visas for the Iranian delegation. This conference, which has been postponed multiple times, was scheduled to take place from February 22 to 24 in London. However, managers of international oil companies say that the main reason for the delay in holding the conference is the factional disputes within the Iranian government, especially ahead of elections scheduled for this month. Signing new contracts with foreign companies and investors is the main focus of Iran's plans to increase crude oil production to pre-sanction levels and achieve a production rate of four million barrels per day. Iran is in dire need of $200 billion in foreign investment to reach this goal. Under the impact of sanctions imposed since 2012 due to its nuclear programs, Iran has lost billions of dollars. Now, Iran wants foreign companies to invest in joint projects with Iranian partners to modernize and exploit its vast resources and aging oil and gas infrastructure. The holding of this conference has been delayed five times due to international sanctions. However, this time it appears that factional disputes over the framework of foreign contracts in the oil and gas industry have prevented Iran from announcing its specific terms. A senior executive from a foreign oil company stated, 'There are severe disagreements regarding new contracts with foreign companies in the Iranian government. Iran has not yet delivered final contracts to us, and nothing has been finalized.' A senior official from Iran's Ministry of Oil told Reuters in November that Iran had prepared and proposed about 52 joint investment projects under new oil contracts with flexible terms suited to changing oil prices and investment risks. Representatives from 135 foreign companies, including BP, Total of France, Eni of Italy, and Lukoil of Russia, participated in a conference held in Tehran in November regarding these plans. However, only general information about these contracts was provided at this conference. One senior executive from foreign companies who attended the November conference in Tehran said, 'It was clear that this conference was held for domestic purposes. I think they have not yet approved the main provisions of these contracts.' Reuters adds that the hardline rivals of Hassan Rouhani, Iran's pragmatic president, are strongly opposed to these contracts, claiming that the Iranian constitution emphasizes that the country's natural resources should not be owned by foreigners. Hardliners criticize Iran's nuclear agreement with world powers that led to the lifting of sanctions. According to the Iranian news agency Shana, Bijan Zanganeh, Iran's oil minister, has described the prohibition of foreign participation in the energy sector as 'illogical' and emphasized that the new contracts are not treasonous. Informed sources in Iran's oil industry say that hardline factions want more involvement and a greater share in foreign contracts. An Iranian oil trader predicts that after the February 26 elections, the oil minister and the National Iranian Oil Company will face more challenges from rival factions. He stated, 'Due to increased pressure from hardline factions, the government's problems regarding foreign oil contracts will increase. Hardliners do not want to be sidelined in an important area like oil contracts and want a larger share in these decisions.' Easing economic sanctions and pulling Iran's economy out of its current dire state will help Hassan Rouhani's supporters in the parliamentary and Assembly of Experts elections. A senior Iranian official told Reuters, 'The government, especially the Ministry of Oil, has been trying to finalize oil contracts before the elections. We need to restore our previous position in the global oil market, and as a result, Iran must propose contracts that are more attractive than those of other oil-producing countries.' Another Iranian official stated that Ayatollah Khamenei and his hardline allies will not allow Hassan Rouhani to gain significant popularity, especially before the elections. He added, 'People are tired and have high expectations. The government is trying to repair the damage caused by years of sanctions. We are in dire need of oil revenue and the new contracts that have been drafted. The committee responsible for drafting these contracts has completed its work and only needs very minor adjustments and final approval. Unfortunately, factional disputes have overshadowed this issue.' Last week, a group of hardline students protested against the new contracts in front of the Ministry of Oil. A senior Iranian official stated, 'All these protests have political motivations. Bijan Zanganeh is an experienced politician and an expert. He loves Iran and believes in the national ownership of oil more than anyone else. He has always defended Iran's interests.'