The Iranian regime signed its first oil production deal under a new less restrictive model that it hopes will boost its production output in spite of a new agreement with other oil producing nations to curb production in an effort to boost sagging oil prices worldwide.
The clincher is that the Iranian oil ministry’s news agency Shana said the government had signed a $2.2 billion contract with a unit of Iranian company Tadbir Energy, which is controlled by a religious foundation overseen by top mullah Ali Khamenei, according to the Wall Street Journal.
The regime hopes its new Iran Petroleum Contracts (IPC), part of an effort to sweeten the terms it offers on oil development deals, will attract foreign investors and boost production after years of sanctions.
The National Iranian Oil Company also signed a contract with Persia Oil & Gas Industry Development Co., an Iranian firm, according to Reuters. The U.S. Treasury Department named Persia Oil & Gas in 2013 as part of Setad Ejraiye Farman-e Emam, or Setad, a secretive and powerful organization overseen by Khamenei.
With stakes in nearly every sector of Iran’s economy, Setad built its empire on the seizure of thousands of properties belonging to religious minorities, business people and Iranians living abroad, according to a 2013 Reuters investigation, which estimated the network’s holdings at about $95 billion. (reut.rs/1g1qkCg)
The U.S. Treasury in 2013 sanctioned Setad and 37 companies it said it oversees, calling it “a major network of front companies controlled by Iran’s leadership.” Those sanctions were lifted in January, as part of the historic nuclear deal reached between Iran and world powers in 2015.
The deal, the first to be clinched under new improved terms for oil companies, is aimed at increasing output from four fields located near the Iraqi border to 260,000 barrels a day, compared with 185,000 barrels a day previously.
The deals target an increase in overall output to 5.7 million barrels a day by the end of 2020, compared to only 3.6 million barrels a day reached just last August. The increase in production is being allowed under an exemption granted to the Iranian regime by the Organization of Petroleum Exporting Countries (OPEC), which may threaten the long-term prospects of the reduction deal.
Ali Kardor, the head of the National Iranian Oil Co., said Monday that Iran intended to return to the market share it held before international sanctions, implying a production level of over 4 million barrels a day.
The near-desperate desire by the regime to hit the increased production levels reflects the mullahs need to gain market share and sell aggressively in order to bring badly needed revenue back into the regime’s bank accounts, which have been largely drained dry through its support of the prolonged wars in Syria, Iraq and Yemen.
The United Nations special envoy for Syria previously estimated the Iranian regime’s support for the Assad regime in Syria topped a whopping $6 billion annually alone, with other analysts estimating the total Iranian support for Syria more than double that amount to $15 billion in military and economic aid in 2012 and 2013.
By signing the first deal under this new IPC structure, the regime hopes to entice foreign oil companies to return to Iran and invest in the development of these fields. Previously, foreign firms were reluctant because of buy-back contracts that only benefitted the regime and often left foreign operators with little to no profit.
The push to boost production is also seen as an attempt by Hassan Rouhani to boast of better economic news as he prepares to run for re-election in next year’s presidential election. Iran’s economy has remained stagnant even after the completion of the nuclear deal last year in which Rouhani promised significant economic benefits that have failed to materialize.
The lack of economic improvement for ordinary Iranians have led to renewed discontent in the form of protests by large sectors of the Iranian economy; from teachers protesting low wages to small business owners chafing under poor sales and workers angry over inflated salaries for high-ranking regime officials.
The inclusion of the first oil deal with a firm under the control of Khamenei also signals that the regime’s leadership is still in primary control over Iran’s future and alongside the Revolutionary Guard Corps, virtually every sector of the Iranian economy is controlled by the regime’s leadership.
That belief in the re-opening of the oil markets to Iranian oil may also be behind the recent snub of the German Economy Minister Sigmar Gabriel who was in Tehran on a high profile visit, but took the opportunity to urge the Iranian regime to pursue reforms at home and act more responsibly in Syria.
He also said Iran, which provides economic and military support to Syrian President Bashar al-Assad, should help push for a ceasefire in Syria’s civil war, adding: “I think Iran knows its responsibility there.”
His comments did not go over well with Iran’s parliament speaker, Ali Larijani, who opted to skip a meeting with the German cabinet member in a display of annoyance over the criticism.
Sadeq Larijani, brother of the parliament speaker and head of Iran’s judiciary, criticized Gabriel on Monday for his comments. “If I were in the government’s position or in the foreign minister’s shoes I would never let such a person come to Iran,” he said.
As Iran tries to re-enter the global markets, it should be ready for even more criticism as the world takes greater notice of the regime’s policies and practices.
Ultimately, Iranian mullah’s desire to regain a spot on the global stage may eventually make it once again even more vulnerable to new sanctions for its bad behavior.
By Michael Tomlinson