Saturday, November 26, 2005

He's Even Stirring Up the Oil Ministry

The Economist:
He pledges to lay low those “aristocratswho sit on a dozen managing boards, default with impunity on loans from public banks and drive armour-plated cars worth USD300,000. But the fight picked by Iran's fiery president, Mahmoud Ahmadinejad, will be hard to win—not least because, in Iran's semi-socialist economy, the line between entrepreneur and civil servant is all but invisible and the rot so pervasive. He has already made an enemy of the architect of many of these ambiguities, Akbar Hashemi Rafsanjani, who selectively liberalised the economy when he was president in the 1990s.

Early this month, Mr Ahmadinejad sacked the bosses of seven of the big public banks that have extended, so he says, 60% of their loan facilities to a privileged 4% of Iranians. He claims to have a “long list” of people who have “dipped into the public purse” but declines Mr Rafsanjani's invitation to reveal it. Most worrying for the president, three months into his tenure, he does not have a grip on the oil ministry, the linchpin of the system he detests. READ MORE

Here, Mr Rafsanjani, a grandee who retains much influence over the ministry, has been helped by parliament, which also gets on badly with the new president. This autumn, deputies have withheld votes of confidence in Mr Ahmadinejad's successive nominees to be oil minister; this week they rejected Mohsen Tasalloti, his third choice. One top oil official criticised the government's plans to spend $3 billion of oil revenues to buy petrol, of which Iran consumes far more than it produces, and its refusal to stop subsidising prices at the pump. Another questioned the existence of what the president calls the “oil mafia”.

In a hydrocarbon-reliant country that Transparency International, a Berlin-based anti-corruption lobby, considers to have a “serious corruption problem”, it would be a surprise if Iran's oil industry were squeaky clean; in 2003, some top people in Norway's Statoil resigned after it emerged that the company had paid bribes to win the right to develop an Iranian oil field. Still, for all the rumours of rigged tenders, there have been, tellingly, no high-profile court cases in Iran. The industry is enfeebled by American sanctions and politicians' antipathy to foreign investors. Scandal is the last thing it needs.

According to a recent report by the International Energy Agency, Iran's oil industry must attract some $80 billion in investment over the next 25 years if it is to meet soaring domestic energy demand and remain a major exporter. Its fledgling gas export industry needs a similar injection; though Iran has the world's second biggest reserves, it is a net importer. But foreign deals need strong leadership. Some putative ones, such as India's plan to buy liquefied gas and develop an oil field, are mired in politics and small print.

Mr Ahmadinejad says he wants to bring Iran's oil lucre to the “dining table of the people”. Not if he can't find a new oil minister.