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Who Owns Iran’s Oil? Corruption in Iran’s Oil and Gas Sector

March 29, 2019 by  

first part – President’s Letter, Khosrow B. Semnani – (taken from “Where Is My Oil?”)

“Our path is not the path of oil. Oil does not matter to us. The nationalization of oil does not matter to us. It is a mistake.

Our goal is Islam. Our goal is not oil. If someone nationalizes oil, but puts aside Islam, why follow him?”

Ruhollah Khomeini

 

In Iran’s epic tradition, the establishment and administration of justice was the duty of the king and the purpose of government. As the guardian of this divine order, the king was obliged to grant every creature its due. Even the ant was entitled to protection, with rights to the fruit of its labor, even if only a crumb. Life had sanctity. Labor, dignity. An injury inflicted on any subject was an injury against the king and, thus, an offense against the divine order.

Corruption and predation were the qualities of demons, not kings. The appropriation of divine authority paved the way for the collapse of the state, for conquest, subjugation, rebellion and chaos. Quite naturally, in a moral order governed by such ancient codes, corruption and cruelty in the heart of a king spread like contagion. The government itself would become a source of injustice, contaminate the fabric of language and law and condemn the body of life to sickness, suffering, darkness and death.

Iran’s epic tradition is as relevant today as it was in ancient times.

The establishment of the Islamic Republic in Iran in 1979 was premised on the notion that secular Western models of government were base, materialistic and corrupt-incapable of establishing justice and meeting the spiritual needs of man. The presence and persistence of poverty in Iran was viewed as a symptom of tyranny-an expression of the Shah’s contempt for the Iranian people and a proof of his enmity against God. By replacing kings with clerics as the custodians of the divine order, Ayatollah Sayyid Ruhollah Musavi Khomeini offered an alternative. As a revolutionary cleric, he would end the usurpation of the public trust and treasure {the beyt ol-maal) by waging a war against corruption on earth.

Khomeini derived much of his prestige from his standing as a cleric. After all, unlike merchants and soldiers, the clergy ‘s hands and hearts were devoted to prayer. They had no claim and no care for worldly gain or national glory.

The implicit promise of Ayatollah Khomeini’s Islamic revolution-one that millions of Iranians, though not all, believed-was that a return to the fundamentals of religion would solve the social and economic ills afflicting Iranian society. In this reading, the source of corruption in Iran was not only the Shah and his demonic regime, but also the exposure of the Iranian people to West-itis-a cultural sickness that had its roots in the West. By placing power in the hands of the clergy-substituting the turban for the crown-Iranians would entrust their constitution and state to an incorruptible class of militant clerics-a religious vanguard that would liberate the oppressed-on earth: Fundamentalists would solve all of Iran’s problems by enacting divine laws and establishing institutions that would transcend rather than descend into the human mire and muck: the corrupt and cheap calculus animating politics and commerce.

In 1979, on the anniversary of Dr. Mohammad Mossadegh’s birthday, Ayatollah Khomeini put forth his vision of the new Islamic order:

“Our path is not the path of oil. Oil does not matter to us. The nationalization of oil does not matter to us. It is a mistake. Our goal is Islam. Our goal is not oil. If someone nationalizes oil, but puts aside Islam, why follow him?”

Today, almost 40 years after the Islamic Revolution of 1979, the Iranian people are reaping the bitter fruit of the Ayatollah’s vision in the form of a failing state and economy.

Far from rooting out corruption, after four decades of Islamic rule, the tables have turned. The gap between the teachings and practice of the Prophet (pbuh), whose title was “Amin;’ the trusted one, and the conduct of the Islamic Republic’s leaders (many of whom have accumulated vast and illicit fortunes) has become impossible to bridge. Iran’s leaders act as a class• above and apart, as if their religious credentials and status exempts them from accountability in this world and the next.

In theory and practice, the principle of Velayat-i Faqih (rule of the supreme jurisprudent), is designed to facilitate corruption on a grand scale. The Islamic Republic is founded on constitutional principles premised on the negation of the Iranian nation as a sovereign entity endowed with a title to their oil, gas, and natural resources. The institutions operating in the leader’s name, claim to derive their authority from a divine source-not from human realities, let alone economic necessities. The operative principle is impunity, not accountability.

The results of this system of governance speak for themselves. Instead of enjoying the fruits of prosperity, today Iran is facing a humanitarian catastrophe.

  • More than 10 million people live under the absolute poverty line, with another 30 million under the relative poverty line.
  • Eleven million live in slums.
  • The number of unemployed is at 3.5 million-add the underemployed and the figure stands at a staggering 6.5 million.
  • Youth unemployment is at more than 20%, with 60% unemployment in underprivileged areas.
  • In 2012, Iran had more than 2.2 million addicts. It also had 1.2 million heroin addicts and 800,000 recreational users-the highest per capita rate of heroin users in the world. In 2017, the number of addicts is officially estimated at 2.8 million, with some putting the figure as high as 10 million.
  • From 2006-2016, HIV rates of infection through sexual transmission have doubled from 15% to 30%.
  • More than 600,000 people are imprisoned every year, with more than 60% identified as drug users.
  • From 2006 to 2013 when the average price of oil had climbed over $100 barrel, Iran’s economic growth was 2.2%, with inflation rate climbing from 20.3% to above40% in 2013.
  • The middle class has seen its purchasing power decline year after year. According to a BBC review of Central Bank data, Iranians have become “۱۵% poorer.” From 2008-2018, the average household income of an urban family has declined by 15%.

The societal damage is such that Ayatollah Ali Khamenei was belatedly forced to admit that the Islamic Republic is “۲۰ years behind” in responding to this unfolding tragedy. According to Reza Faraji Dana, Iran’s Minister of Science, Research and Technology until 2014, every year more than 150,000 highly educated Iranians emigrate from /ran at a total cost of$ T 50 billion. Fully 25% of all Iranians with tertiary education-a vast professional class now work in the OECD member countries. lndeed, one need only look to the squandering of Venezuela’s wealth, the plunder of its oil sector, the collapse of its economy and the plight of its poor and middle class to understand the gravity of the threat of looming over Iran.

Although many Iranians thought the revolution would usher in a new era-ending the dismissal of their rights and the abuse of power by a monarchical order-in practice, by voting for the principle of Velayat-i Faqih, they were lured into a constitutional trap, essentially surrendering their civil, economic and social rights to a new monarch, a religious leader who claimed to derive his universal right to rule the Iranian people from a divine source.

Today, Iranians are not turning their backs on the West, but on Velayat-i Faqih, the brand of Islamic government advocated by Khomeini and his followers.

Because of corruption, many no longer see religion as a solution to their problems but as the cause of their suffering.

In a country endowed with Iran’s human and natural resources, the social costs of this unfolding tragedy can no longer be blamed on corrupt individuals or the West, but on the failure of a political and economic system to deliver on its promises to the Iranian people.

With corrupt ion on a scale unimaginable under the Pahlavi dynasty, it is not Iran’s kings, but Iran’s ruling clerics who are viewed as the source and beneficiaries of corruption.

And sadly, instead of fighting corruption by making transparency, accountability, and service the pillars of government, powerful factions in Iran’s Parliament and judiciary serve as a cloak for covering up the plunder of Iran’s resources rather than exposing corruption. As in the feudal and colonial era, the people are once again treated as subjects, not citizens.

The story of Iran’s oil is at the heart of this historic betrayal. It can no longer be overlooked. What is at stake is the Iranian people’s sovereignty and prosperity. Corruption is not only an economic and a political threat. It is an existential threat: a violation of the Iranian people ‘s title and claims to their natural resources, a negation of their control over the institutions that govern these resources, and the denial of their claims to every drop of their oil and the benefits that flow from it.

In 2009, the Iranian people and media asked a question that shook the world: “Where is my vote?” Today, we join them in asking a related question, one makes the different between poverty and prosperity for million: “Where is my oil?”

Omid for Iran, a nonprofit established to protect the interests of the Iranian people, seeks to raise this question to set the stage for a systematic review of Iran’s oil and gas industry. More importantly, to reclaim their oil and gas, and put Iran back on the path to prosperity. In fact, given the epidemic of corruption and poverty in Iran, we seek to make anti-corruption a national priority. It is vital to quantify the cost of corruption in Iran’s oil and gas industry if we are to address and reverse the consequences of corruption in a systemic manner.

Where Is My Oil? will demonstrate that the damage to the Iranian people from corruption by design is more than $1 trillion. It bears repeating-more than $1 trillion.

Perhaps nothing illustrates the gravity of the question “Where is my oil?” more succinctly than its physical manifestation – the challenges of locating and tracking the movement of Iran’s oil. As late as the second half of 2016-well after the lifting of sanctions on Iran’s nuclear program-ships carrying a fifth of Iran’s oil exports had gone “dark with many indicating that their Iranian cargo” began the journey in a different country, though satellite imagery showed them to have been loaded in lran:

The theft of Iran’s oil amounts to grand corruption theft in the tens and hundreds of billions of dollars. The cost of this strategic mismanagement to Iran’s economy over the past decade exceeds the trillion-dollar mark. Left unchecked, this corruption will plunge Iran into the category of failed states, with all the insecurity, poverty, crime and chaos that can follow.

The Iranian corruption cases leave no doubt about the facts: there is an arc of corruption that extends from the Islamic Republic’s ties to commodities trader Marc Rich in 1979 to its ties with Babak Zanjani in 2015 to the 2017 confessions of Reza Zarrab and the cloak-and-dagger presidential disputes over the Crescent Petroleum corruption case. To be sure, corruption existed in Iran before 1979, but it has mushroomed after. While before 1979, cultural and religious norms made theft and corruption taboo, today theft and corruption are so brazen that the fundamental ethical, cultural and religious norms are being swept away.

The change has been decades in the making. Corruption was institutionalized in the aftermath of the Iran-Iraq war, in the so-called era of construction and privatization, only to metastasize in the era of the so-called “resistance economy: Iran’s revolutionary establishment has either actively engaged or deliberately concealed corruption on a grand scale for decades.

In a country in which millions of laborers, teachers, nurses and government workers can barely secure a living wage, corruption is a killer – a pandemic 12 million Iranians are under the absolute poverty line, with 8.2 million living on less than $5.50/day. Another 40% of the population – more than 30 million people-are pushed beneath the poverty line. Transparency and accountability in Iran’s oil and gas sector cannot remain a public relations exercise. It is an urgent national imperative-dollars and cents that mean the difference between nutrition and malnutrition among the most vulnerable people.

The waves of anti-government protest erupting across Iran in early 2018 should not have come as a surprise to anyone tracking teacher’s strikes and labor unrest in Iran.

A powerful statement by six Iranian worker’s organizations – three years earlier-should have made the plight of Iranians apparent:

Today every decent human being is aware of the undeniable fact that millions of working people in large and small industries, teachers, nurses and retirees are living in the worst possible situation in the country’s recent 50-year history. This means that, according to the experts and government officials, currently the lives of millions of families have fallen under the poverty line and fruit, meat and dairy products have been removed from their tables …

Such horrendous conditions did not occur in a country ravaged by famine; this condition is imposed on workers in a country which has a young, educated and skillful workforce and the highest combined oil and gas reserves in the world. Is it not shameful that teachers are forced to cover their living expenses by working as taxi or bus drivers? Do pensioners in this country deserve to feel huge pressure in their lives and tremendous concern about their livelihoods because of their meagre pensions? Do you know a country with millions of workers who are working 12 to 18 hours per day, yet are incapable of providing the basic needs of their families and stand ashamed in front of their children? Do you agree that in such a country thousands of people can reach to the point of selling their kidneys, prostituting themselves while we see addiction, misery, desperation and frustration of millions of its people, from teenagers to elderly?

As stated in the letter: The continuation of this unstoppable cycle of oppression imposed on the workers’ standards of living over the years and decades to the extent that even today, while the minimum wage of 608,000 tomans/month (about $180/month), many of them even do not receive the minimum

wages. According to the expert and the formal institutions of the government, an expenditure basket for a family of four, is more than three million tomans [fair wage) (about $900/month), and thus the survival of our workers is impossible.

Teachers have not fallen silent either. On the 40th Nowruz (Iranian New Years Day, March 20, 2018), the former Secretary General of the Iranian Teachers’ Trade Association, Esmail Abdi, wrote a letter from Evin Prison addressed to the International Labor Organization. He declared that he would begin a hunger strike on April 18, 2018 to protest the widespread violations of teachers and workers in Iran:

The blessings of the revolution benefitted not the poor, but rather the rich, the powerful, and tricksters … They took advantage of the people’ beliefs and values to attract votes, while amassing wealth from the nation’s treasury… (See the complete letter in Appendix 5)

Sadly, the Islamic Republic, according to its own admission, was not listening, let alone alleviating abject economic ‘conditions of “the oppressed” classes it claimed to champion.

The margins matter. As does oil. To millions. The “paystub scandal” involving Ali Sedghi, chairman of Bank Refah Kargaran (Worker’s Welfare Bank) is yet another illustration of the scourge of corruption and inequality.

The collapse in the purchasing power of the salaries of the poor and middle class has not stopped senior government officials and executives from gorging at the expense of the state. Iran’s Civil Service Management Law, ratified in 2013, restricts the maximum wage of civil servant to seven times the minimum wage. Ali Sedghi of the Worker’s Welfare Bank, however, earned 2.34 billion rials per month ($76,500) in compensation for his labor-”roughly 300 times” more than the wages of a common worker.

to be continued

 

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