Kamal Daneshyar, Chairman of Majlis Energy Commission

Excessive consumption of gasoline is approaching alarming limits and every year, billions of dollars of Iran’s oil revenues are spent on gasoline subsidy. Although the sixth Majlis approved a bill to increase price of energy carriers to the level of Persian Gulf FOB price during the Fourth Economic Development Plan, the seventh Majlis overruled the bill arguing that such a law would boost inflation and put more pressures on low-income social classes. The MPs approved another plan to fix price of goods and state services, which prevented the government from increasing price of some goods and services such as water, electricity, gas, telephone, and gasoline. The law was approved in 2005 and everybody expects is to continue into the next year. However, there are ambiguities related to situation of gasoline supply to consumers because, on the one hand, consumption is growing and, on the other hand, big cities including Tehran are grappling with air pollution and heavy traffic problems. In the following interview, Kamal Daneshyar, chairman of Majlis Energy Commission, answers questions regarding the country’s oil policy as well as oil mafia, whose existence was stressed by him a while ago.

Regardless of what price the government considers for oil, half of oil revenues should be settled to the Oil Stabilization Fund to be spent on developmental projects and fundamental investments. Part of it should also be set aside for country’s budget because oil money is not earned through producing goods or services. Therefore, spending all petrodollars to keep up domestic economy is very dangerous and will be ensued with dire inflationary consequences. Adopting such a policy will cause collapse of domestic economy.

It is of no objection, but share of oil revenues from the country’s next year budget should not exceed 20 billion dollars because those dollars should be converted to rials and if rial budget is in short supply we would have to print new banknotes, which will exacerbate inflation.

The government can take advantage of the Oil Stabilization Fund for investing in the oil industry. That is, National Iranian Oil Company can take loans from the Oil Stabilization Fund and spend it on infrastructural affairs as well as development of oil and gas fields and also use resultant revenues to pay back the loans it has taken.

In upstream projects, which include studying reservoir, drilling, constructing pipeline and building separator units, using foreign technology and capital should be supervised by Iranian companies.

Of course, the government’s bill should be forwarded to the Islamic Consultative Assembly (Majlis) to see what policy has been adopted by the government. However, rationing gasoline seems to be necessary and if part of the gasoline is imported from other countries, it should be sold to people at the cost price.

We have stressed the need for building suitable culture for promoting correct consumption of gasoline. Meanwhile, we pay attention to inflationary effects of gasoline price and maintain that as long as underprivileged social classes are not covered properly and we have not developed a suitable public transport system, considering two different prices for gasoline will have inflationary effects and will lead to public dissatisfaction.

We will be exporting 2.5 million barrels oil per day and its price will exceed 50 dollars per barrel because demand for fossil fuels is increasing worldwide, but production does not match demand and there is little possibility of increasing production. Therefore, we predict that oil price hike will continue.

The most important issue is ambiguity of contractual terms related to upstream oil contracts. Our past methods are faulty and we have not still reached new agreements on adopting a new method. Therefore, the most important snag is lack of a well-defined plan for signing oil industry contracts.

We have, for example, problems with buyback contracts.

The main reason is inattention to expertise, as well as scientific and technical qualifications of domestic oil specialists which reminds one of the old poem, which says some people look outside their homes for what they have already got at home. This will lead to protests by concerned officials. Therefore, before doing anything, we must pay due attention to domestic experts. Then we can import what we really lack, including money and technology, from abroad.

In upstream projects, which include studying reservoir, drilling, constructing pipeline and building separator units, using foreign technology and capital should be supervised by Iranian companies. Also, the National Iranian Oil Company should be delegated with enough powers to sign oil contracts.

They are all lies. Sanctions only have negative effects on the American companies. Of course, they slightly increase risk of investment and increase cost of contracts for Iran, but the main loser is American companies. However, sanctions have no effect in terms of preventing oil investments in Iran.

This is not the case. The world is expanding and major companies have emerged, which are not controlled by the United States. Their interests make them have relations with Iran. Therefore, US sanctions will automatically turn into sanctions against the American companies and other companies take their place. We also discussed increasing price of Iran’s oil contracts, but this will ultimately harm end consumers because low oil production will push up oil price.

The oil mafia was first brought up by the former minister of petroleum Bijan Namdar Zanganeh. He said, “Oil mafia is at work from within and without the Ministry of Petroleum.” Mass media had issued reports on this issue a couple of years ago. This was later brought up by Mahmoud Ahmadinejad during his presidential election campaigns, which was welcomed by the people. In fact, a main reason for people to vote for Ahmadinejad was his promise to fight the oil mafia. Therefore, this shows that existence of oil mafia is upheld by the former minister of petroleum, the current president and the bulk of Iran’s oil experts as well as majority of Majlis deputies. Therefore, oil mafia exists both inside and outside Ministry of Petroleum and is not imaginary.

Oil mafia works in two ways and the effects of one of them is already seen in the society. One way is discussing issues in an apparently expert manner in favor of the country, which is, actually against the country’s interests. Another way is sending ripples into the society. Oil mafia achieves its goals through special forces both inside and outside oil industry. Of course, such affairs are guided from outside the country.

I only refer to signs of oil mafia and it is for intelligence and judicial officials to announce subjective examples and give names of real entities after bringing them to punishment.

But the main signs of oil mafia include:

1. Why contracts have been signed in Iran whose cost has been, at least, twice the real costs?

2. Why is Iran’s oil sold 8-10 dollars less than American oil?

3. Why do we go on with selling crude oil which has been imposed on us for over 100 years and why don’t we produce oil products and sell them?

4. Why enough gas is not injected into Iranian oil fields which have reduced our production from 6 million barrels per day to 6 million barrels a day? If we do not inject adequate gas into oil wells, our production will reach 2 million barrels per day within the next 10 years and the country will incur huge losses.

5. What statistics support claims about Iran having extra gas for exports? Big contracts are signed on the basis of this delusion, which will pose serious threats to our country in future.

6. According to what expert view we refrain from building oil refineries and continue to import gasoline? We have to spend five billion dollars on gasoline imports during the current year and the figure will reach 6 billion dollars next year and will amount to 30 billion dollars during four-year tenure of president Ahmadinejad.

7. How come that whatever announced by International Energy Agency is taken as divine revelation as Ministry of Petroleum’s policy? For example, the Agency has predicted that Iran can produce seven million barrels oil per day. What does it mean? Realizing such predictions is not possible in any way. Billions of dollars will be squandered on such useless ideas.

8. Why experienced experts are discarded one after the other and inexperienced forces take their place?

When oil mafia imposes a wrong policy, that wrong policy is adopted and entails heavy costs for our country. Excessive import of goods and services helps oil mafia to earn a lot of money. Another harmful effect of its activities is damaging oil reservoirs, which leads to premature depletion.

For example, drug smuggling gangs in Iran are in cahoots with global mafia networks. We have lost 3,000 police who were martyred while fighting against drug trafficking and a lot of traffickers have been hanged for drug smuggling. However, since smuggling stems from outside Iran, the problem has not yet been solved in Iran because drug mafia sets its policies outside Iran’s borders and replaces its forces. For this reason, smuggling illegal drugs from Afghanistan and Pakistan into Iran continues and drugs are ultimately transited to Europe. In the meantime, they distribute part of their cargo inside Iran. Therefore, despite prominent achievements, we have not been able to solve this problem because its roots are outside the country. The same is true about oil. Oil mafia works globally and may induce Iranian experts through expert views and some domestic experts may repeat what they say. Therefore, we must pay attention to forces recruited by that mafia as well as its wrong policies.

As I said before, oil mafia is not imaginary and is a reality. We know them and even know their names, but such information cannot be disclosed now. Oil mafia acts in a very dangerous manner and perhaps it is for this reason that when president says oil mafia exists, minister of petroleum claims that he knows nothing about oil mafia. We know the oil mafia and we are not afraid of them.

Yes. They recruit members in Iran. Oil mafia is constantly disseminating misleading information in the world. That erroneous information is presented through complex and intangible methods and causes countries to commit dangerous mistakes.

Oil mafia did exist before victory of the Islamic Revolution; it existed under previous governments and it exists now. It has been actively recruiting new forces.