United States Institute of Peace

The Iran Primer

Report: Rouhani's Plan to Revive Oil Industry

            President Hassan Rouhani and his oil minister, Bijan Namdar Zanganeh, have launched an ambitious reform program for the oil and gas industry. They are trying to roll back the dominance of the Revolutionary Guards, halt privatization, prioritize near-completion projects and attract foreign investment, according to a new brief by Brandeis University’s Nader Habibi. The Rouhani administration has also taken steps to promote fuel conservation and reduce energy subsidies. But many obstacles lie ahead for the reform plan, such as oil ministry management issues, a bloated workforce and populist political pressure. The following are excerpts from the brief with a link to the full text.

 
           Soon after his victory in the June 2013 presidential elections, Hassan Rouhani announced that reforming and revitalizing the oil and gas sector would be one of his government’s top priorities. He and many of his aides showed no hesitation in criticizing the policies of former president Ahmadinejad toward the oil and gas industry in his two-term tenure.
 
           Like other oil-exporting nations, Iran depends heavily on oil revenues to finance government expenditures and pay for imports. When these revenues decline, the economy suffers. A combination of international sanctions and poor domestic management led to a gradual decline in daily oil output and stagnation in natural gas output in most of the years of Ahmadinejad’s presidency. The decline accelerated in 2012 as the United States and the European Union introduced new sanctions against Iran’s oil exports and put pressure on countries that were buying hydrocarbon products from Iran. While the Ahmadinejad administration put most of the blame for this decline on sanctions, critics of his government claimed that his own policies caused more damage to the oil and gas sector than did the sanctions.
 
           Political factions inside Iran still disagree regarding the causes of the decline, but there is no dispute about the magnitude of output loss in recent years. According to OPEC statistics (which are based on official data provided by member governments), Iran’s oil production fell from 4.3 million barrels per day (mb/d) in September 2011 to 3.3 mb/d in November 2013. Daily exports of crude oil likewise declined, from 2.7 mb/d in 2011 to just under 1 mb/d in the final months of Ahmadinejad’s presidency. Rouhani has tried to address both causes of this decline mentioned above: He is seeking to negotiate an agreement with the P5+1 group of world powers to end the international sanctions (which have disproportionately targeted Iran’s oil and gas sector), and he is reforming the country’s oil and gas industry.
 
Rolling Back the Dominance of the IRGC
           President Rouhani has no formal authority over the Revolutionary Guards, but he has used his good relationship with the Supreme Leader to reduce the domestic economic activities of the IRGC. It appears that this initiative has been successful, as the Supreme Leader has instructed the IRGC to step aside in some areas of economic activity. In return, President Rouhani has promised to offer several large-scale construction contracts to the IRGC’s engineering arm.
 
Reviewing the Privatization of National Iranian Oil Company Subsidiaries
           While Ahmadinejad justified many of his interventions in the oil and gas sector in the name of fighting corruption and nepotism, Zangeneh has exposed many irregularities and corrupt practices in connection with NIOC’s privatized downstream subsidiaries that were involved in refining and distributing oil and gas products. During Ahmadinejad’s presidency, oil ministry subsidiaries accounted for nearly 46 percent of all Iranian firms that were privatized through stock share offerings. Zangeneh claimed that many of these firms were sold below fair market value in corrupt dealings.
 
Prioritize Near-Completion Projects
           In another break from the Ahmadinejad era, Zangeneh has frozen some of the oil ministry’s development projects that are in the early stages or have not gone beyond the design and planning stage, to focus on remaining active projects that are more promising and more likely to be completed by domestic firms. This policy is most evident with respect to the development of the offshore South Pars natural gas field.
 
Promote Fuel Conservation and Reduce Energy Subsidies
           While the oil ministry has always been a strong advocate of reducing the massive price subsidies on domestic prices of refined oil and gas products, Zangeneh has intensified these efforts in recent months. These large subsidies force the oil industry to allocate an ever-growing portion of its output to domestic consumption. Furthermore, the forgone export revenues put a constraint on the oil ministry’s budget, both with respect to development projects and for the wages and benefits of its personnel.
 
Many Challenges Lie Ahead
           The policy initiatives described above may help Iran revitalize its oil industry and increase the country’s oil and gas production, if they can be effectively implemented.
Many potential obstacles, however, stand in the way of such implementation. Internally, the oil ministry faces a productivity and personnel crisis rooted in management weaknesses and an oversized workforce.
 
           Populist pressures can also limit the financial resources – both the oil ministry’s fiscal resources (budget) and the extent of loans and financing available from state-owned banks – available for the ministry’s maintenance and development activities, required for expanding its production capacity.
 
           An even more significant risk factor with respect to the ambitious plans of Zangeneh is the uncertain prospects for success of the nuclear negotiations. Much of the oil ministry’s ability to boost Iran’s output depends on the outcome of these negotiations: If they fail, international oil firms will not enter the Iranian market even though the oil ministry’s new investment contracts would offer them more attractive financial incentives.
 
Click here for the full report.
 

More “Happy” Videos Go Viral in Tehran

            Iranian youth have posted several videos of themselves dancing and lip synching to Pharell William’s hit “Happy.” One version featuring three women — without hijab — and three men went viral and led to the dancers’ arrest on May 20. They were pressured to express remorse on state television. But all six were released the following day, after people from across the world including Pharrell Williams condemned their detention via social media. A tweet on President Hassan Rouhani's semi-official account may have indicated disapproval of the detention: “Happiness is our people’s right. We shouldn’t be too hard on behaviors caused by joy.” The following are some of the latest videos from Iran.  

"Happy in Tehran" directed by Ehsan Azimi
 
 

Young Iranians dance in streets and parks around Tehran

 

"HAPPY – Pharell William’s Iranian Puppet Fans" by animator Mehdi Alibeygi
 

 

Clips of breakdancers from Tehran's Rahaa Crew put to "Happy"


"Happy [Tehran Dance Edition]" directed by Sassan Soleimani
This video was viewed more than 100,000 times on YouTube before the six dancers were arrested. It has been reposted several times.

 

 

G-7 Statement on Iran

      On June 5, the leaders of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, the President of the European Council and the President of the European Commission issued a declaration at the close of the G-7 summit in Brussels. The following is the full text of point 35, which focuses on Iran.

  

35.   We reaffirm our strong commitment to a diplomatic resolution of the Iranian nuclear issue and welcome the efforts by the E3+3, led by High Representative Ashton, and Iran to negotiate a comprehensive solution that provides confidence in the exclusively peaceful nature of Iran's nuclear programme. We underline the importance of the continuing effective implementation by the E3+3 and Iran of the Joint Plan of Action. We call on Iran to cooperate fully with the International Atomic Energy Agency on verification of Iran's nuclear activities and to resolve all outstanding issues, including, critically, those relating to possible military dimensions. We strongly urge Iran to fully respect its human rights obligations. We call on Iran to play a more constructive role in supporting regional security, in particular in Syria, and to reject all acts of terrorism and terrorist groups.

Click here for the full declaration.
 

Photo credit: By Number 10: The Prime Minister’s Office via Flickr (CC BY-NC-ND 2.0)

 

Khamenei at 25 Years - Defies US in Speech

            On June 4, Supreme Leader Ayatollah Ali Khamenei marked the 25th anniversary of Ayatollah Ruhollah Khomeini’s death with an address to hundreds at the late revolutionary leader’s mausoleum. Khamenei told Iranians that decades of “troublemaking” by the United States had failed to hold back the Islamic Republic. “It’s been more than 35 years since the West launched the largest political, economic and military attacks on Iran’s religious democracy, but Iran keeps advancing.” He warned, however, against “shifting focus away from the real enemy and on to [internal] disputes ... and losing national unity.
          
Khamenei also lauded Iran’s accomplishments since the 1979 revolution in fields such as science and politics. He noted that Iran has held 32 elections in 35 years, usually with high turnouts. The following are tweeted remarks from the hour-long address and video clips dubbed in English by semi-official state television.
           

 

 

Khamenei at 25 Years - What is his legacy?

      June 3 marks the 25th anniversary of revolutionary leader Ayatollah Ruhollah Khomeini’s death —and the emergence of new Supreme Leader Ayatollah Ali Khamenei. The following are comments by The Iran Primer’s original authors on Khamenei’s quarter century in power.

 
Alireza Nader
            Ayatollah Ruhollah Khomeini became the leader of a revolution that overthrew Iran’s monarchy and established the current Islamic Republic. Khomeini was shrewd, calculating, in some ways dogmatic, and in other ways politically savvy. It was due to Khomeini that velayat-e-faqih (guardianship of the jurist) was established as the basis of Iran’s political system. Khomeini had many enemies, but he ruthlessly vanquished most and established the modern world’s only true theocracy.
            His successor, Ayatollah Ali Khamenei, has continued Khomeini’s legacy, but has faced many challenges and setbacks. Whereas Khomeini was respected by the theocratic elite, Khamenei is viewed as divisive and dictatorial, favoring certain conservative factions over the others. His support for Mahmoud Ahmadinejad’s presidency, especially in the face of the 2009 disputed presidential election, tarnished his reputation among many Iranians.
            Today Khamenei rules over a nation exhausted by the revolution and unsure of its future. He rules through force and patronage rather than respect and authority. 
            Alireza Nader is a senior international policy analyst at the nonprofit, nonpartisan RAND Corporation.
 
Juan Cole
            Ayatollah Ali Khamenei's 25 years in power have seen Iran become more and more isolated from the world community and the world economy. Iran has few friends and even those among the BRICS nations (Brazil, Russia, India and China) that have correct relations with Tehran have voted for tough sanctions on it. Khamenei's backing for the Baath regime in Syria and for the Dawa government in Iraq has made Iran deeply unpopular in the Arab world, wiping out the soft power gains of 2006 when Iran stood with Hizbollah in Lebanon against Israel.
            Domestically, the ideology Khamenei represents is accepted by only a small minority of the population, and there have been two major reform movements, the 2nd of Khordad and the Green Movement, against his authoritarian puritanism. He deeply damaged his and his regime's credibility by attempting to steal the presidential election in 2009. In the 1970s, Mohammad Reza Pahlavi unrealistically hoped for Iran to equal France by the year 2000. In 2014, France's nominal GDP is about $2.5 trillion. Iran's is about $550 billion, about the same as the tiny country of Norway, also an oil state, and as Poland, which has only half Iran's population. Khamenei in many ways has mired Iran in cultural, political and economic stagnation.
            Juan Cole is professor of history at the University of Michigan and runs the Informed Comment weblog.
 
Bruce Riedel

            Very few expected Khamenei to succeed 25 years ago with Iran devastated by eight years of war with Iraq. Iran seemed to be in decline, the future lay with Baghdad. Now Khamenei has outlasted all his regional rivals from Saudi Arabia’s late King Fahd to former Egyptian President Hosni Mubarak.  Iraq, thanks primarily to America, is Iran’s junior ally and partner in keeping Bashar al Assad in power in Damascus.  Khamenei is no Bismarck, he has just been lucky to have foolish opponents.
            Bruce Riedel, a senior fellow at the Brookings Institution’s Saban Center, was special assistant to the president and senior director for Near East and South Asian Affairs at the National Security Council during the Clinton administration.

Haleh Esfandiari
            Iranian women have not fared well under the leadership of Ayatollah Khamenei. Has made it a practice to receive women from different walks of life a couple of times a year. His message to them is always the same: the important role women play in an Islamic society, with special emphasis on motherhood and caring for the well-being of the family. He did not object to raising the age of marriage for girls from 9 to 13, but failed to support the abolition of polygamy or the abolition of the right of a husband to unilaterally divorce his wife. He has led the campaign to dismantle the family planning program in Iran, calling on women to have more children, and he does not see the need for Iranian women to have equal access to employment. He has never criticized the morality police and the excesses of the paramilitary Basij in harassing women on the streets. Despite all this, Iranian women continue to be the force for change in the Islamic Republic and seem undeterred by new restrictive laws, brutality on the streets, and being preached at all the time.
            Haleh Esfandiari is director of the Middle East Program at the Woodrow Wilson International Center for Scholars and the author of “Reconstructed Lives: Women and Iran’s Islamic Revolution” and My Prison, My Home: One Woman’s Story of Captivity in Iran.”
 
Hadi Ghaemi
            After twenty-five years of rule, Seyyed Ali Khamenei is one of the longest ruling leaders of Iran in the past century. His rise from a relatively insignificant cleric with the rank of a Hojattoleslam to an Ayatollah and Supreme Leader of the Islamic Republic is remarkable.
            A stark indication of Khamenei’s ruthlessness is his determination to sideline political leaders close to the Islamic Republic’s founder, Ayatollah Khomeini. The aftermath of the 2009 election and the subsequent and ongoing house arrest of Mir Hossein Mousavi and Mehdi Karroubi, both confidants of Ayatollah Khomeini, demonstrate Khamenei’s instinct for survival clearly trumps political loyalties.
            Khamenei’s distancing of Khomeini loyalists also reflects the Supreme Leader’s fundamental ideological predisposition. Khomeini was willing to integrate elements of modernity when it served his or the new Republic’s interest; Khamenei is not. Indeed this is a man fearful of modern trends culturally and politically speaking, who perceives modernity as an unacceptable risk to his vision if not survival.
            Yet Khamenei has proven to be a shrewd politician who has solidified his position over time despite his lack of personal charisma. He has groomed a loyal following in the intelligence and security apparatus, and the Revolutionary Guards Corps. Whether during the student uprising of 1999 or the post-election crackdown of 2009, Khamenei has sidelined political rivals and put down popular challenges.

            Khamenei’s legacy will be defined as much by what happens to the office of the Supreme Leader after him, as it will be defined by his actions in that position. He has elevated himself to Absolute Supreme Leader, recalling the position of monarchs who ruled Iran for centuries before the Islamic Republic.
           Hadi Ghaemi is an Iran analyst and the Executive Director of the International Campaign for Human Rights in Iran.

Kevan Harris
            Neither in Iran's 1979 constitution nor its 1989 revisions does the term “Supreme Leader” ever appear. The Leader is designated as both the absolute religious jurist as well as the supervisor of a multitude of state institutions. To the consternation of Iran's conservatives, however, neither source of power has been successfully monopolized by the Leader's office. The name's the thing which provides some clues: Islamic Republic.
            In the sphere of theology, Shiism provides a wealth of competing interpretations — used as a tactic by Ayatollah Hossein Ali Montazeri, Abdolkarim Soroush, former President Mohammad Khatami, or even President Hassan Rouhani —with which to challenge state prerogative. Islamic law, after all, has traditionally been a source of protection for the community against the encroachments of the state.
            In the sphere of politics, the necessity of legitimating the post-revolutionary government through popular participation means that top-down dictates can sometimes be checked by bottom-up people power—often with the surprise of the people themselves. The hard efforts spent declaring the supreme-ness of the Leader — it's even on his own website — should be read as an inverse clue to the actual state of affairs. In another time, the idea of the European “absolutist state” reflected the attempts by kings to evoke full sovereign power — l'état, c'est moi — but not the political reality. The unintended legacy of Ayatollah Khomeini's fusion of state and religion was the fragmentation of sacred religious legitimacy within the mundane realm of modern political rule. Try as he might, Khamenei has not been able to put this mischievous jinni back in the bottle.
            Kevan Harris is a sociologist and Associate Director of the Mossavar-Rahmani Center for Iran and Persian Gulf Studies at Princeton University.
 
Dov Zakheim
            Ayatollah Khamenei has always been viewed by his colleagues as more politician than religious leader. As such, and to prove his religious bona fides, he has always taken a hard line on any issue that has come his way. In addition to being a hardline defender of the faith, he has presided over Iran's terrorist activities, and its determined effort to develop a nuclear weapons capability. He has established the Revolutionary Guards as the most powerful single force in Iran. Ultimately, it will be he and the Guards who will determine whether to reach an accommodation with the West, and, in particular, whether Iran will accept any kind of accord that restricts its long-term nuclear ambitions.
            Dov S. Zakheim is senior advisor at the Center for Strategic and International Studies and vice chairman of the Foreign Policy Research Institute.
 
Gary Sick
            True revolutionaries are visionaries who are far more concerned with their vision than with the mere problems of running a government. Khomeini was a true revolutionary. His vision of a theocratic state has forever changed the politics of Iran, but it has not translated into effective governance. The tension between vision and practice is the issue that will occupy Khomeini's successors for the next generation and beyond.
            Gary Sick, principal White House aide for Iran and the Persian Gulf on the Carter administration’s National Security Council, is now executive director of Gulf/2000, an international online research project on the Persian Gulf at Columbia University.
 
Farideh Farhi
           Twenty-five years after his passing, the legacy of Ayatollah Khomeini, like the legacy of other men whose name and towering presence is tightly bound to a world-historical revolution, remains conflicted and contested. There are those who only remember his ideologically stern and ferocious defense of the revolution at all cost while there are others who see in his famous and oft-repeated words, "standard is the people's vote," a call for pragmatism, flexibility, and adaptability to what is happening on the ground. Even his bold act of taking responsibility for ending the Iran-Iraq War, drinking from the poison chalice as he called it, is contested today with some in Iran saying that he was pressured to accept UNSC resolution 598 by folks who no longer had the grit to fight until victory. The nature of contestation in Iran today continues to be about which of his imagined sides should dominate and not about laying his legacy to rest. 
            Farideh Farhi is an independent scholar and affiliate graduate faculty at the University of Hawaii at Mānoa.
 
Click here for full biographies of the authors.
 
Click here for the authors' chapters.
 
 
Photocredit: Khamenei.ir
 

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