July 2009, Nos. 52&53

Oil & Gas

Zangeneh Reflects on Management, Banking and Oil Industry in Iran

There is no transparency here and nobody knows what has happened to the banks. Our banks are grappling with a crisis which is unprecedented in the history of banking in Iran.

Bijan Namdar Zangeneh, minister of Agriculture Jihad under Prime Minister Mirhossein Mousavi; minister of energy under President Akbar Hashemi Rafsanjani; and minister of petroleum under President Mohammad Khatami, took part in a meeting of the Coordination Council of Engineering, Guild, and Professional Organizations. He disclosed in that meeting that Iranian banks have gone bust many years before the current global crisis, but officials have withheld that information from people. Zangeneh added, “They (other countries) are transparent and everybody knows what is going on. There is no transparency here and nobody knows what has happened to the banks. Our banks are grappling with a crisis which is unprecedented in the history of banking in Iran.”

During the meeting, which was held at the conference hall of Ettelaat daily newspaper, Zangeneh stated, “We are really in a very bad situation which apart from low oil price, the rest of it has nothing to do with global crisis. They say that our economy is not in trouble because it is not closely related to international economy. Firstly, not having relations with the international economy is not a privilege and, secondly, who has said that we are not in the middle of a full-fledged crisis?”

Explaining about the economic crisis and lack of transparency, Zangeneh said, “Our banks have been bankrupted many years ago, but we have not told people. Those countries were transparent and people knew everything. Here, they are not transparent and nobody knows what has happened to the banks. Our banks cannot disburse facilities because tens of thousands of billion tomans have been lost. They have given out that money to people and nobody knows who has received them. In other words, that money will not return to banks and they are grappling with a crisis which has no precedence in history of the Iranian banking.”

He then focused on the oil industry and asked, “How is the government approach to oil? Once we may consider oil as revenue and spend it on current expenses. But we may also not consider oil as revenue, but an asset which should not be spent on everyday expenses. Oil should be turned into assets on the ground. The Oil Stabilization Fund was a mechanism thought of to do this in the First Economic Development Plan. Under Mr. Khatami, we drew five to six billion dollars from the Fund.”

Zangeneh then pointed to billions of dollars worth of projects implemented in his time, and said, “If you need 1,000 billion dollars, you don’t need to have all that money. It would suffice to have 200-250 billion dollars and attract 750-800 billion dollars through finance. That is you can attract four dollars for every dollar that you have.”

He then explained about Iran’s oil revenues in the past four years and said, “During those four years, we have earned 290 billion dollars through oil sales all of which has been spent on import of goods which were not industrial machinery or capital goods. If we had worked according to the Fourth Economic Development Plan, we should have had more than 170 billion dollars in the Oil Stabilization Fund through which we could have implemented 680 billion dollars worth of projects. How many projects have been given to domestic contractors? I am very sorry that the government has spent all that money and it is still indebted to all contractors. What has happened to that money? If you were bent on developing the country, you should have given the money to contractors, but you haven’t.”

He also reviewed Iran’s foreign relations and said, “I think our foreign relations should be corrected. If a country aims to be developed and achieve an economic growth rate of over 8 percent to become the region’s top scientific, technological, and economic power by 2025, it cannot avoid using foreign resources. It cannot be deprived of foreign technology and have no access to foreign markets. You, as engineers, should have access to foreign markets. It won’t help if you have to wait three months before they issue visa to you. In that case you won’t be able to obtain or send tender documents and take part in tender bids. You cannot wait for four months before sending in your workforce. I believe that foreign policy should be directed at development. Who has said that dignity is not compatible with being a Muslim? Who has claimed that the honor of Iran is not compatible with having good relations with other countries? Or if we want to have good relations, we must forget about our values? Such claims are outdated and belong to the Cold War era. China, India, and Malaysia are all following their mottos and develop, on the other hand. When there is inefficient management, they try to find a foreign enemy and blame it for everything. They want to say that if they are inefficient, it is because they have foreign enemies which impose sanctions and do not allow them to work. We must not do anything to bring sanctions on us. I maintain that we can do many things without risking sanctions. Sometime, about 60,000 people worked in Assaluyeh and we sold oil for 20 dollars per barrel. We funded those projects through other sources than oil revenues and 60,000 people worked there. A few days ago, Mr. (Mohammad Reza) Nematzadeh (the sacked deputy petroleum minister) told me that only five to six thousand people are now working in Assaluyeh.”

He concluded his remarks by saying, “It is my duty and obligation toward my people, children and future generations to do everything I can. I am not interested in going back into the government, but I think people like me and all of us are responsible before the future generations and we must do whatever we can to change the status quo because its continuation will lead nowhere but more humiliation for Iran and Iranians. We are rapidly falling behind the neighboring countries and the world and this is very alarming. It is really pitiful for a country with so many good managers and such rich human resources. I am really sad about the 200 billion dollars that has been lost, but more than that, I am worried about capacities and human assets which are being buried alive. This is much more unfortunate than those 200 billion dollars. Money is not the main source of development, but it is requirement of development. If management is good, it can be provided from various sources.”