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

July 2, 2019 by  

۲nd & final part – President’s Letter, Khosrow B. Semnani (taken from “Where Is My Oil?”)

There is nothing random about millions of Iranians finding themselves buried under the poverty line. Bureaucratic sleaze and sloth only explain so much. What they do not explain though, is how, in a period of sanctions, when the Iranian people were subject to severe strain, the Central Bank and key ministries were facilitating the flow of millions of barrels of oil and billions of dollars in capital out of the country. There is nothing abstract about these figures.
They did more than pinch Iranians in their pocketbook. At a time when foreign reserves were scarce, the Central Bank rigged the game in favor of crony capital. Luxury car importers serving the nouveau riche “aghazadeh class” were subsidized with preferential foreign exchange rates, while the Health Ministry, facing a $2 billion budgetary shortfall, was charged higher rates than the luxury car importers essentially condemning millions of middle and lower-class Iranians to subsidize Porsches by purchasing medicine at black market prices. While Reza Zarrab and others had unrestricted access to Iranian gas and oil accounts in Turkey, purchasing race horses, hovercrafts and yachts with $150 million commissions, paying $50 million bribes and distributing $700,000 Patek Phillipe luxury watches, poor Iranians were effectively locked out of receiving adequate health care. Those deaths and debts count.
Revolutionary slogans and saber-rattling-the unrelenting calls and chants of “death to America” and “death to lsrael”-have masked a much more pernicious reality: the corruption of Islam and the impending death of Iran, not as a sudden calamity but as a daily tragedy.
In an Islamic Republic where the judiciary puts such a high price on sheep that it turns the amputation of a thief’s hand into a national spectacle, there is a virtual blackout surrounding the theft of Iran’s oil. Instead of honoring and serving the Iranian people by arresting the hands involved in the systematic theft of Iran’s oil and gas, even tankers and rigs, the government treats the Iranian people as peasants whose only care, concern and asset is their sheep.
But this is not a time for lament. It is a time for action.
An empirical approach to corruption matters. Quantification is a basis for ​reclamation- systematic action rather than cheap slogans. It is not enough to condemn corruption as a scourge. Once quantified, in the form of a data-base of corruption cases, corruption can and has been traced and reversed. The World Bank Group and the United Nations Office on Drugs and Crime have an established Stolen Assert Recovery Initiative (StAR) that allows countries like Iran to work across jurisdictions to prevent money-laundering and the theft of assets crucial to Iran’s development and prosperity. Rather than being helpless spectators subject to the plunder of their natural resources, as in the Zanjani case, making government accountable and corruption visible sets the stage for recovering tens of billions of dollars in stolen assets hidden outside Iran. Given the global nature of criminal enterprises siphoning Iran’s oil under the guise of evading sanctions, international treaties, institutions and partners can help Iran’s Central Bank track and recover billions hidden outside Iran.
Reversing the curse of corruption can unleash enormous blessings for the Iranian people. The linkages between Iran’s oil and gas industry and the rest of Iran’s economy are extensive. Based on our analysis, using the Iranian Parliament’s own social accounting matrix (SAM), every dollar generated by the oil and gas sector can be leveraged into three or four dollars in the rest of Iran’s economy.
By the same token, every dollar taken out of the sector is the equivalent of three to four dollars taken out of the economy.
The math behind corruption’s impact is not complex. Even without an investment strategy or a multiplier effect, every billion dollars in oil revenues, if distributed as cash subsidies, is the equivalent of approximately 100,000 salaries at fair wage levels of $900/month ($10,800/year).
Using the World Bank’s International Finance Corporation (IFC) models, the multiplier effect of $2.7 billion could create as many as 300,000 jobs at a living wage of $900/month.
The $2.7 billion allegedly l.ost in a single corrupt ion case, if distributed as wages, would have provided 270,000 families with $10,000 each, the equivalent of a living wage of 3 million tomans/month ($900) for a year.
With Iran’s oil and gas reserves valued at more than $17 trillion, reclaiming the sector and restoring the National Iranian Oil Company’s prominence, productivity and performance as a “national champion” on the world stage is vital to the economic well -being of the Iranian people. As with Iran’s constitutional revolution, such a reclamation, ultimately, depends on the mobilization of the Iranian people in a collective struggle against corruption. Transparency and accountability only have meaning where and when a people have a deep sense of ownership-an understanding of the value of oil not only to themselves but to their children, descendants, neighbors and nation.
Given the scale of unemployment and the spread of poverty in Iran, silence before such a humanitarian catastrophe is not an option.
The oil mafia’s fingerprints are everywhere.
Under the cover of religion, corruption has taken the form of abuse of power, nepotism in appointments, bribery and kickbacks, divulging secret information, rigging bids, improper vetting of contracts, illegal allocations of oil, sale of discounted oil, foreign currency transfers, purchase of phantom rigs, illegal and unauthorized withdrawals from accounts, suppression of reports, audits and investigations, judicial whitewashing of corruption cases and the amputation of legal and religious principles for the sake of expediency. To this day, the movement of entire tankers carrying unknown volumes of oil remains shrouded in mystery.
Far too often, corruption is concealed from the public as a matter of national security. Instead of pursuing corruption cases, the individuals and institutions charged with protecting the public interest act as pirates. Stakeholders- critical institutions and individuals-participate in government to secure their stake in the plunder of the nation’s wealth. Under the rubric of protecting national security, the most elementary legal, financial and reporting requirements are flouted, effectively creating an information black-out concerning governance of the oil and gas sector. Those who dare to expose and oppose corruption are attacked for violating the sanctities of Islam, for propaganda against the system, and for insulting the leadership.
The irony, of course, is that in this, the age of surveillance, information is hard to conceal. While Iran’s judiciary, and other institutions, do their utmost to keep material and documents classified, at times by eliminating government officials, at others by muzzling the Parliament and the press, much of this information is known to foreign powers, among them the United States, Russia, China, Israel and others. Official communications and bank accounts, transfers of funds, flows of oil, movement of tankers, purchases and movement of material can be tracked at a level of detail and with an ease hitherto unimaginable. Quite apart from the tracking of officials, funds, documentation, communication and oil tankers, technological innovations such as ground -penetrating radar (GPR), can detect pipelines several meters beneath the ground, let alone what transpires above the ground.
The destruction of Iran’s centrifuges in a cyberattack by the Stuxnet virus showed the level of detail at which Iran’s most closely guarded secret-the nuclear program-had been penetrated. There is no reason to believe that the operations of Iran’s oil, gas, shipping and banking industry are better protected than Iran’s nuclear program. Much the same holds true for official communications. Given that the NSA can tap the communications of the German Chancellery-sweeping vast amounts of data even from low priority targets-the notion that the Iranian’s government can conceal communications concerning corruption in Iran’s oil and gas sector is a pipedream. So is the notion that the Islamic Revolutionary Guard Corps (IRGC) can conceal billions in illicit smuggling activity – activities at all of Iran’s ports and docks are easily picked up by satellite. The Zarrab case should have put that conceit to rest.
The irony about concealing corruption under the veil of national security arguments is that it puts foreign powers in a position to secure concessions by bribing and blackmailing Iranian officials. The only people left in the dark are the rightful owners of Iran’s oil. And gas.
Our goal and duty is to lift this shroud-to make the operation of Iran’s oil and gas sector transparent and its management accountable to the Iranian people. As the owners and beneficiaries of Iran’s oil and gas resources, every barrel of oil and dollar of revenue flowing through Iran’s oil sector belongs to them, not the thieves of state.
It stands to reason, then, that what makes Iran’s vast reservoirs of oil a blessing or a curse is neither the chemistry nor the conspiracies around oil. It is the character of the Iranian people and their leaders.
But, the fate of the sector cannot be left to experts and officials alone. All Iranians have a stake in the health, productivity and prosperity of their mother industry.
Failure to secure Iran’s oil and gas supply chain will have dire, and compounding consequences for Iran’s economy. In this sense, ownership must go well beyond demands for accountability and transparency at every level of Iranian state and society. It requires a plan of action. Saving Iran’s oil and gas sector depends upon all Iranians claiming their right to their oil and demanding systematic and corrective action at the legal, regulatory, operational, administrative and financial domains.
In the memorable words of Afshin Molavi, author of The Soul of Iran, the gift is not only a geological endowment but also a spiritual inheritance, a blessing and bounty that since time immemorial has lit the heart, the homes and the temples of the Iranian people: It is this sacred light, one that burns in the hearts and homes of all Iranians, that thieves of state wish to extinguish.
Omid for Iran’s sincere hope is that this paper, which draws heavily on the work of many scholars, practitioners and journalists, will help raise awareness about the gravity of the theft threatening Iran’s oil and gas industry. More importantly, we hope it will place the question of the reclamation of Iran’s oil and gas sector at the forefront of debates about reviving Iran’s economy.
By its own account, a theocracy that negates the sovereignty of the Iranian people in the name of religion has turned into a kleptocracy that robs Islam of sanctity to conceal the corruption of an oil mafia-the thieves of state. This theft is not an unintentional blemish on the Islamic Republic. It is masterfully organized, systematic and global. It has no place in Iran and no justification in Islam.
As in the past, the Iranian people will reclaim an inheritance for which so many have sacrificed so much. Every barrel of oil-every drop-belongs to Iran’s children. It is every Iranian’s duty and obligation to defend this treasure as guardians of a sacred trust. Justice demands no less.
But justice is a collective endeavor- it will not be delivered by a divine savior. It will come only when the Iranian people take charge of their destiny and insist on turning their suffering into an unyielding and total rejection of a culture of impunity and corruption. When individuals stand firm against the indignity and injustice implicit in bribery and corruption, their actions have ripple effects that extend from their family and work environment to the culture and society at large.
Though Iran’s representative institutions are terribly compromised and in many cases corrupted, in recent years, a few notable members of Parliament have spoken out against the plunder of Iran’s natural resources. Clearly, key parliamentary leaders and committees, regardless of faction, recognize that tackling corruption goes beyond investigating and scapegoating individuals. Restoring accountability and transparency depends on good governance: the structural and systemic reform of institutions charged with managing Iran’s oil and gas sector. Every city, town and neighborhood in Iran stands to benefit if their elected representatives speak out against the theft of the people’s oil and gas revenues.
For our part, we at Omid for Iran, recognize the scale of corruption that Iran’s oil and gas sector represents a humanitarian catastrophe. The human cost of corruption is many times greater than the human cost of military strikes against Iran’s nuclear facilities, the subject of our earlier study, The Ayatollah’s Nuclear Gamble. Then, as now, shielding the Iranian people against such threats recognizes no boundaries. It demands a national, and indeed, a global response: concerted and systemic efforts inside and outside Iran.
President Donald Trump’s decision to withdraw from the Iran nuclear deal in May 2018 makes the task of tackling corruption that much more urgent. As with the Ahmadinejad era, the reimposition of US sanctions affords criminal and corrupt actors the opportunity to justify corruption on a grand scale in the name of economic resistance and national security. Nothing can be farther from the truth. Given that the Iranian people will once again absorb the price of the regime’s ideology, manifest as military conflict abroad, accountability and transparency become the key to securing Iran’s oil and gas resources and revenues against another round of plunder and predation.
Failure to do so may benefit war profiteers and economic speculators eager to profit from crisis. But it will ruin millions of families who cannot afford and must not subsidize the impact of sanctions: a spike in prices for everything from foodstuffs to medicine, a collapse of foreign exchange reserves, runs on the banks and other forms of instability and mayhem playing out in Venezuela and other failed states.
In short, a new round of international sanctions makes the war against corruption, and thus the governance of Iran’s scarce resources, a matter of life and death. More, not less, urgent. Our hope is. that the “Where Is My Oil?” campaign will serve as a nucleus for understanding the scale of the problem, changing the systems, and securing the benefits of Iran’s oil and gas sector for the Iranian people. We are heartened by the success of anti-corruption campaigns and movements around the world, including those in Iran, and welcome all efforts by the Iranian people, media and government to reclaim and restore the National Iranian Oil Company (NIOC).
It is our hope that the findings and recommendations in this paper will serve as a basis for a much deeper collaboration for addressing and reversing the crisis of accountability, transparency, legitimacy and sovereignty in Iran. Towards this end, Omid for Iran will host a series of consultations and conferences on the governance of Iran’s oil and gas industry.
Solutions are within our reach. There is no lack of education, experience or expertise in tackling corruption. And there is certainly no lack of love-we are all willing to do our part to secure a better future for Iran. Our challenge is implementation: turning love into a principle and plan of action backed by a government that is transparent and accountable to the Iranian people-not beholden to the thieves of state.
The exercise of ownership depends on a people who act, not as bystanders, indifferent about the fate of their children, but as warriors revolted by the abuse of their children’s trust.

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