Monthly Archives: October 2013

South Pars Gas Field In Iran: Mismanagements, Contract Delays, and Corruption

The South Pars is a major natural gas condensate field in the Persian Gulf.  It is the world’s largest shared gas field,  Iran shares this field with Qatar.  According to IEA, the South Pars field has an estimated 1,800 trillion cubic feet ( 51 trillion cubic meters) of natural gas and around 50 billion barrels of natural gas condensates. The size of this field is around 3700 square miles, of which 1400 square miles is in Iranian territorial waters, and 2300 square miles in Qatari territorial waters.

The Iranian National Oil Company (NIOC)  announced the discovery of the South Pars Field in 1990,  and its subsidiary the Pars Oil and Gas Company took jurisdiction over all the South Pars-related development projects.  Iranian government designed the development structure of the field in 24 to 30 phases,  hoping to produce 25 billion cubic feet to 30 billion cubic feet of natural gas per day.  The estimated capital investment for each phases was around $1.5 billion.   Yet, since the founding of this field in 1990, developments have been marred by corruption,  mismanagement,  inefficiencies,  and contractual issues. A high-ranking Iranian Oil Ministry official has announced that “Iran should invest one billion dollars every month for the development of projects in the South Pars gas field.  In a stunning revelation,  the National Iranian Oil Company Managing Director Roknodin Javadi said that a delay in investing this sum of money will cause a loss of about $100 million per day for the country.

Bahman Bakhtiari

Assessing the Costs of Islamic Republic’s Policy Choices and Actions

The costs of the actions  and policies pursued by the Islamic Republic since its founding in 1979 have not received enough scrutiny.    The sanctions have already imposed an enormous cost on the Iranian people.  But consider the following:

 1.  The 1979 Revolution-Opportunity cost and loss of investment, comes to $ 59 to $732 billions.  According this paper,  The costs imposed on the average Iranian citizen are quite high. For a country with per capita real GDP of less than US$ 10,000 for the sample period, an annual opportunity cost equal to US$ 2,500 is very high. To better understand this issue, think about roads not built, research and development not funded, health care improvements not realized, houses not built, and pension and retirement savings not made. In other words, the average Iranian is significantly poorer than his/her neighbors or in comparison with what (s)he could have earned due to policies and actions taken by the Iranian state.”  P.  28

2.  The Hostage Crisis of 1979-1981  cost Iran  $12 billions of its assets  in the United States when U.S. froze these assets.

3.  The Iran-Iraq war ( 1980-1988) cost  Iran  In excess of  $500 billion.

4. The Nuclear Program-keeping Iran’s nuclear program going has already “cost Tehran more than $100 billion in lost oil revenue and foreign investments alone.”   

When one thinks of these enormous figures,  one can see how much of Iran’s economic potentials have been destroy due to policy choices of the regime in Tehran.                                     



Bahman Baktiari

How sanctions have helped Iran’s Revolutionary Guards’ economic and political influence

Najmeh Bozorgmehr of Financial Times has an excellent analysis of the Revolutionary Guards’ economic power and reach in Iran.  According to her analysis,  Rouhani  “is seeking to counter the commercial reach of the Revolutionary Guards.”   Through its front-companies and vast network of connections,  “associates of the Guards have profited from $120bn of so-called privatisations to acquire core national assets, notably in the communications sector. This has only strengthened the financial muscle that the Guards had accumulated from their traditional cash cow: taking a hefty cut from imports of consumer goods, believed to range from glass to Maseratis.”

Sanctions have clearly hurt the Iranian economy,  effectively blocking the Islamic regime’s ability to conduct trade with the world.  But what is also clear is that sanctions have contributed to corruption and funneling of billions of dollars  to entities like the Islamic Revolutionary Guards Corps (IRGC). The IRGC is “allegedly involved in smuggling oil, arms, electronics, and consumer goods, possibly amounting to $12 billion a year.”  According to a report by the Global Financial Integrity,  between 2006 and 2008, when the first round of UN and U.S. sanctions were put into place,  the amount of money illicitly taken out of the Iran per year nearly tripled, from $4.3 billion to $12.8 billion.   Recently,  a member of the parliament stated that  in the past eight years  “more than $600 billions of money has left Iran for overseas account.”  The question is not whether there is corruption in IRGC,  but how much ?

First round of Nuclear Negotiations end, what is next ?

Two day talks between Iran and P5+1 group  ended in Geneva.  Iranians put forward a proposal to allow intrusive IAEA inspection in accordance to the Additional Protocols that Iran had agreed in 2004-2005,  but never ratified.  For the first time,  Iran has publicly agreed to certain limitations on its nuclear program,  although specific details were not disclosed.  Western officials described the discussions as “substantive” and “forward-looking.”  Another first-time event was a joint press release by Zarif and Ashton.   Both officials emphasized positive steps,  expressed their satisfaction with the talks. Representatives from the two sides are to meet again in Geneva for talks on Nov. 7 and 8.

Compared to previous negotiations between Saeed Jalili and Ashton,   this time the atmosphere was clearly very different.   After May 2013 round of negotiations,  participants described their discussions as “fruitful,” and “useful.” In contrast,  nuclear negotiations between Zarif and Ashton were described as “substantive.”   According to one expert, “a key challenge will be to reach agreement on an interim measure that balances the P5-plus-1 desire to halt advances in Iran’s nuclear program with Iran’s desire for early sanctions relief.”  

Nuclear Talks in Geneva

Iran and the P5+1 group ( US,  UK, France, Russia, China +Germany)  hold their first nuclear talks with the government of Hassan Rouhani.   Expectations have been very high due to several months of positive signals exchanged between the two countries ending with a high-level telephone conversation between Obama and Rouhani after 34 years.   Iran’s Foreign Minister opened the talk with a PowerPoint presentation entitled “Closing an Unnecessary Crisis – Opening New Horizons.”  Despite a heavy press and media contingent on the scene,  not much is being reported about the details of their discussions.  But one thing is certain: The atmosphere has changed significantly from previous round of negotiations when the Iranian delegates were giving sermons and lectures,  instead of addressing the issues of concerns.  The stakes for both governments cannot be underestimated,  but one thing that is favoring the negotiations is the shutdown of U.S. government that has taken the attention of senators and congressmen away from these negotiations,  no one is issuing critical statements, or threats to put more sanctions on Iran.

Bahman Baktiari