Foreign Investment in Iran May Drop Further
Media Line News Agency
July 06, 2009
Foreign investment in Iran´s vital oil and gas sector may plummet in the aftermath of the recent presidential elections.
Sanctions against Iran mean foreign investment in the region is already low. Following the violent clampdown on demonstrations in the capital Tehran after President Mahmoud Ahmadi Nejad was reelected by a huge margin, it could drop even further.
"The other glaring issue in Iran is foreign investment," said David Butter, regional director for Middle East and North Africa with the Economist Intelligence Unit in London. "Now, this has more or less dried up over the last few years…crucially, in oil and gas and petrochemicals, which Iran really depends on as bedrock for its economy. The investment in foreign technology is absolutely vital."
One such project is the South Pras natural gas field, one of the largest in the world, located under the Gulf in waters shared between Iran and Bahrain. The China National Petroleum Corporation, together with the French company Total, is currently in the process of developing one of the 24 sectors that the huge field is divided into.
However, Total's Chief Executive, Christophe de Margerie, was recently quoted as saying that negotiations were not in a very advanced state and that the company was waiting for things to calm down, according to news agencies.
While the Chinese might have the financial clout to invest in such a huge project, they are not considered as having the same level of technical know-how as the French company.
The comments by de Margerie come only a day before the Iranian Oil Ministry announced plans to invest $75 billon in the development of two major gas fields by 2015.
No details were presented as to how the government planned to finance the project, the state news agency, Press TV, reported.
New York State Comptroller Thomas DiNapoli announced on June 30 that his state´s Common Retirement Fund would divest $86.2 million from companies doing business in Iran. The announcement followed California Insurance Commissioner Steve Poizner´s calls for insurance companies doing business in California to reveal whether they have investments in Iran.
But not everyone is convinced that foreign companies will divest from Iran. "Foreign companies especially in the gas and oil sector are not likely to withdraw from the country and miss out on the longer terms profits," Kourosh Ziabari, an Iranian journalist and a political correspondent at Foreign Policy Journal told The Media Line.
The state of the national economy was one of the main topics under discussion before the Iranian elections, and Mir Hossein Moussavi, the main opposition candidate, accused Ahmadi Nejad of mismanaging the economy.
"Mr. Ahmadi Nejad has his own radical policy of fading out subsidies by replacing them with cash handouts to the population," Butter said. "That requires quite a high degree of cooperation from the parliament and will be difficult to administer. Another policy that he has tried to bring in is Value Added Tax, in order to establish a new stream of revenue to the budget, which is very heavily dependent on oil revenues. That, again, will require cooperation from the bazaar and the merchant class, and I don´t think that in a very unstable political environment that´s feasible."
When a similar proposal was raised last year, the merchants of the main market in Tehran reacted by closing their shops until the proposal was dropped.
Sanctions against Iran mean foreign investment in the region is already low. Following the violent clampdown on demonstrations in the capital Tehran after President Mahmoud Ahmadi Nejad was reelected by a huge margin, it could drop even further.
"The other glaring issue in Iran is foreign investment," said David Butter, regional director for Middle East and North Africa with the Economist Intelligence Unit in London. "Now, this has more or less dried up over the last few years…crucially, in oil and gas and petrochemicals, which Iran really depends on as bedrock for its economy. The investment in foreign technology is absolutely vital."
One such project is the South Pras natural gas field, one of the largest in the world, located under the Gulf in waters shared between Iran and Bahrain. The China National Petroleum Corporation, together with the French company Total, is currently in the process of developing one of the 24 sectors that the huge field is divided into.
However, Total's Chief Executive, Christophe de Margerie, was recently quoted as saying that negotiations were not in a very advanced state and that the company was waiting for things to calm down, according to news agencies.
While the Chinese might have the financial clout to invest in such a huge project, they are not considered as having the same level of technical know-how as the French company.
The comments by de Margerie come only a day before the Iranian Oil Ministry announced plans to invest $75 billon in the development of two major gas fields by 2015.
No details were presented as to how the government planned to finance the project, the state news agency, Press TV, reported.
New York State Comptroller Thomas DiNapoli announced on June 30 that his state´s Common Retirement Fund would divest $86.2 million from companies doing business in Iran. The announcement followed California Insurance Commissioner Steve Poizner´s calls for insurance companies doing business in California to reveal whether they have investments in Iran.
But not everyone is convinced that foreign companies will divest from Iran. "Foreign companies especially in the gas and oil sector are not likely to withdraw from the country and miss out on the longer terms profits," Kourosh Ziabari, an Iranian journalist and a political correspondent at Foreign Policy Journal told The Media Line.
The state of the national economy was one of the main topics under discussion before the Iranian elections, and Mir Hossein Moussavi, the main opposition candidate, accused Ahmadi Nejad of mismanaging the economy.
"Mr. Ahmadi Nejad has his own radical policy of fading out subsidies by replacing them with cash handouts to the population," Butter said. "That requires quite a high degree of cooperation from the parliament and will be difficult to administer. Another policy that he has tried to bring in is Value Added Tax, in order to establish a new stream of revenue to the budget, which is very heavily dependent on oil revenues. That, again, will require cooperation from the bazaar and the merchant class, and I don´t think that in a very unstable political environment that´s feasible."
When a similar proposal was raised last year, the merchants of the main market in Tehran reacted by closing their shops until the proposal was dropped.
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