In "Sanctions would help Iran solve its gasoline problems," Sara Vakhshouri-Bellenoit argues that the current international energy market and domestically refined petroleum products in Iran are two factors that indicate inefficacy of the sanctions sponsored by the US regarding banning of gasoline sales to the Islamic Republic (OGJ, Feb. 15, 2010, p. 22). Bellenoit further advocates that the sanctions bills passed by the US Congress a few months ago are not a curse but rather a blessing for the clergy regime in Iran.
I believe Bellenoit's article misses the more fundamental truth about Iran. The looming economic failure, a result of the chronic corruption within the system, specifically in the oil industry, renders Iran quite vulnerable to sanctions (OGJ, May 5, 2008, p. 26). Additionally, ever-growing social unrest–a result of the absolute nonexistence of any fundamental civil freedom for citizens–and the lack of respect for human rights in Iran today make international sanctions very much effective.
Bellenoit argues that the international sanctions carry no weight because Iran is the fourth largest oil producing country and its gas reserves are second in the world. Sanctions are not about exporting any oil and gas from Iran, but rather discontinuing sale of gasoline to Iran. Further, Bellenoit warns that the Islamic regime has the ability to close the Strait of Hormuz through which 17 million b/d of crude and refined petroleum pass. However, the Islamic regime would be the first producing country to lose its oil income.
Bellenoit claims that before the so-called revolution in Iran in 1979, international oil companies under long-term agreements were responsible for about 90% of crude oil exports from Iran. Contrarily, the international consortium, which controlled about 84% of Iran's oil export, was dissolved in 1973 before reaching its agreement term, and from that point the National Iranian Oil Co. took control of the entire agreement area, including 100% of oil export.
Bellenoit further asserts that the Islamic regime, in 1979, "announced it would reduce production from a pre-1979 level of over 5.5 million b/d to 3.5-4 million b/d in order to save resources for the future." This statement is erroneous. When the Islamic regime took over, a healthy and economically sound oil industry gradually ceased to exist.
Production after the revolution never reattained its previous peak, not because the Islamic regime was concerned about the future but because experienced, well-educated, and properly trained oil workers from all levels in every industry sector were arrested or terminated; many fled the country. Additionally, the 8-year war with neighboring Iraq and poor management with roots in bribery and corruption inevitably caused a drastic drop in oil production.
Bellenoit tries to establish that the lack of desire to invest in the Iranian oil and gas sectors by international oil companies is due to the legal restrictions placed on investment in Iran's oil and gas industry by the constitution of the Islamic regime. The problem is the "buyback contract" system, Bellenoit emphasizes.
I believe the problem of lack of interest in investment in the petroleum industry in Iran lies in the nature of the Islamic regime. In 2004, in order to overcome the restriction in its constitution, the Islamic regime revised the "buyback contract" system by adding a comprehensive reward element to the system, by modifying the length of contracts, and by announcing its readiness to negotiate the financial structure of the buyback contracts. Even these revisions have not attracted any flood of investors.
Bellenoit cites examples of Iranian companies working in "upstream business with foreign companies." This is exactly where the bribery and corruption thrive. In a well-publicized example, Statoil of Norway in 2006 acknowledged the payment of bribes in 2002 and 2003 to a high-rank official who was also a shareholder of the Iranian firm Petropars to secure a development contract for part of offshore South Pars gas field. Statoil paid fines and disgorgements in the US and Norway. Another European company, Total, acknowledged to French authorities that bribes were paid early in 1997 in connection with contracts for two South Pars development phases.
While I agree with Bellenoit that the Iranian oil industry is not completely strangled, Iranian output has reached a plateau, and production is on the wane. The lack of maintenance has resulted in the country losing production capacity by at least 200,000 b/d/year. Furthermore, the NIOC has been forced to cut back and shut in some wells due to rapid pressure drops and rising water intakes.
In discussing the main issue, gasoline problems in Iran, Bellenoit at one point cites that "many Iranians see cheap gasoline as their birthright." This statement is reminiscent of the prevarications of the founder of the Islamic regime, the Ayatollah Khomeini. While in France before the so-called revolution, Khomeini professed that "in the Islamic system, you will have free gasoline, free electricity, free water, free bus fare, and all people are guaranteed to receive monthly shares in the form of cash from oil income."
Bellenoit later claims that "many Iranians simply purchased an extra car for its quotas." This cannot be an accurate statement. Presently, nearly 65% of Iranians live below the poverty line, according to the World Bank. "Many Iranians" cannot even afford to purchase one car, let alone an extra one.
I was born in Iran, and I also worked for the NIOC for many years. Iranians are noble people. The riots in Tehran mentioned by Bellenoit did not occur because Iranians like riots but because they were desperate.
The glory of the Islamic regime is only in spending Iran's wealth for non-Iranians and in monetary support of international terrorist groups across the world. The Islamic regime has built refineries in various nondemocratic countries that are friendly with the Islamic regime but hostile toward freedom-loving people. Billions of dollars of Iranian money and millions of barrels of free oil from Iran have gone to Syria, Sudan, Zimbabwe, Tanzania, Gambia, Gabon, Bolivia, Ecuador, Cuba, Sri Lanka, Uganda, and even oil-rich Venezuela.
Uganda president Yoweri Museveni was in Tehran in the early part of March 2010 and finalized the commitment of the Islamic authorities to build a refinery in Kampala, Uganda. However, not even one refinery has been built in Iran since 1979, with the exception of the inauguration of the Arak refinery and Bandar Abbas complex that were near completion in the monarchical regime and postponed until the end of the Iran-Iraq war.
It is shameful that a country with such copious amounts of oil and gas resources, and more than 1.49 million b/d of refinery capacity, needs to import nearly 40% of the gasoline it needs. All the Islamic regime has done so far is broadcast false and empty promises. Some of these worthless promises are evidently taken seriously and documented by Bellenoit, such as announcements of the allocation of $15 billion to build new refineries in Abadan and Bandar Abbas in 2007, and the allocation of $27 billion for the construction of seven refineries by 2013.
As long as the Revolutionary Guards are in charge of purchasing the needed gasoline and importing this gasoline from their own secret terminals in the Persian Gulf, as long as they are officially in control of gasoline distribution in the country downstream to the retail stations, and as long as they have the power to set gasoline prices, quotas, subsidies, and so forth, this ugly fiasco will continue. Simply selling 66 million l./day of gasoline domestically is a very profitable business for the leaders of the guards. Meanwhile, it is very easy for a responsible and caring government with about $1 trillion of oil income from the last 31 years to construct a $3 billion refinery or at least to upgrade and renovate the once-600,000 b/d Abandan refinery, which has not been repaired and maintained since the end of the Iran-Iraq war in 1988.
The problem in Iran is the absence of liberty; people in Iran are crying for democracy. In the absence of democracy, corruption flourishes, debilitating social structure and creating poverty. However, despite all this misery the Iranian people welcome the serious and meaningful sanctions and expect that the international oil companies belonging to the democratic nations will keep their distance from this uncivilized regime. Their intention of supporting freedom in Iran, and their expression of concern for suffering Iranians at this time of oppression will certainly gain oil companies their welcome when a new Iran is in place.
Mansour Kashfi
Kashex International
Dallas
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