Vol. 3, No. 1 July 15, 2003
Iran has enjoyed a substantial windfall from oil prices, which has more than matched its additional budgetary expenses and has enabled it to establish a special “fund for future generations.”
The attitude of the clerical regime was largely to be blamed for the steady decline in Iran’s oil output from 6 million b/d in the late 1970s to 3.5 million b/d in 2002.
Iran’s Ministry of Petroleum is concerned that international oil companies will prefer to invest in the development of new pro-Western Iraq’s resources rather than in restrictive, clergy-dominated Iran.
As far as the Pentagon is concerned, there is hardly any difference between the radical Iranian clergy who control Iran’s policy and President Muhammad Khatami’s “so-called reformist government.”
Iran Enjoys Windfall from High Oil Prices
Iran has enjoyed a substantial windfall from oil prices, which has more than matched its additional budgetary expenses and has enabled it to establish a special “fund for future generations.” According to most sources, Iran has between 80 billion and 90 billion barrels of oil reserves. In addition, Teheran claims that Azedagan, the huge new oil field discovered in Khuzistan (just a few miles from the Iraqi border) about three years ago, may contain tens of billions of barrels of oil. Teheran also claims that its Caspian region holds about 25 billion barrels of oil or oil equivalent.
Iran’s natural gas resources are next to those of Russia and Turkmenistan. They consist of 812 trillion cubic feet (tcf), with 280-500 tcf located in Iran’s South Pars field in the Persian Gulf (an extension of Qatar’s North Field), and an additional 50 tcf in the North Pars field.
Yet, despite high oil prices and GDP growth of 4.3 percent in 2003, the Islamic Revolution has failed to bring prosperity to Iran’s largely poor population. Iranians’ standard of living has continued to decline in recent years and the (unofficial) unemployment rate in urban areas is estimated at about 20 percent.
Hostility Toward Western Investment Leads to Oil Production Decline
Iran’s post-1979 Islamic Revolution government has maintained a hostile attitude toward foreign (particularly Western) investment in its energy sector. The attitude of the clerical regime was largely to be blamed for the steady decline in Iran’s oil output (6.0 million b/d in the late 1970s, 3.5 million b/d in 2002). This policy had begun to change by the mid-1990s, and especially after the rise to power of President Khatami’s government in 1997.
However, Iran’s clergy establishment continues to hamper the efforts of Teheran’s Ministry of Petroleum to involve foreign investment in the country’s energy resource development to this day. As a result, for instance, the development of the huge South Pars gas field by foreign companies is extremely slow, despite the substantial interest in this enterprise. This, plus inferior technology and lack of spare parts caused by the U.S. embargo (Iran-Libya Sanctions Act of 1996), is the reason for the continuous decline of Iran’s older oil fields, despite the output of offshore fields coming on line. For example, Japan’s National Oil Company (JNOC), which won a buy-back agreement for the development of the Azadegan field nearly three years ago, still cannot implement the agreement due to obstacles emanating from Iran’s conservative clergy.
Not surprisingly, Iran’s Ministry of Petroleum is concerned about the possibility that international oil companies will prefer to invest in the development of new pro-Western Iraq’s resources rather than in restrictive, clergy-dominated Iran. This apprehension has been augmented recently by Washington’s increasingly aggressive anti-Iranian policy, led by the Department of Defense. Indeed, Washington has called upon JNOC and Shell Corporation to halt their investment in Iranian energy in light of Teheran’s accelerated development of nuclear weapons and alleged support of Islamic terrorism.
The Axis of Evil
Iran is still a target in President Bush’s “axis of evil.” This has been amplified by increasing evidence that Teheran is accelerating its endeavors to become a nuclear power, its active opposition to U.S. Middle East policy, and encouragement to Iraq’s Shia population to establish a Shia-dominated theocracy rather than a U.S.-planned, secular, democratic, pro-Western (U.S.) government in Iraq. The possible rise of a Shia theocracy in Baghdad is a nightmare to the Saudi-led Arab (Sunni) regimes that Washington is now wooing (on Saudi regime importance to U.S. interests, see the interview with Deputy Defense Secretary Wolfowitz in Vanity Fair). It also totally contradicts U.S. plans to turn Iraq into a major (pro-Western) oil producer (which could eventually help control OPEC) and become an axis of America’s regional policy.
Looking Toward Regime Change
Defense Secretary Rumsfeld and other senior Defense Department officials in Washington have been pushing the Bush administration to adopt a formal policy of “regime change” concerning Iran (but not recommending another war) instead of the present diplomatic measures promoted by Secretary Powell. As far as the Pentagon is concerned, there is hardly any difference between the radical Iranian clergy who control Iran’s policy and President Muhammad Khatami’s “so-called reformist government.” In the final analysis, most leading reformists, including Khatami himself, came from the ranks of the radical Assembly of Combatant Clergy. Indeed, some (led by Muhtashemi-Por) helped found the Lebanese Hizballah and are strongly opposed to the U.S.-sponsored Palestinian-Israeli peace negotiations. The cleavage between the left-wing socialist/democratic-oriented “reformist” clergy and the dominant right-wing mullahs is over the wish of the reformists to carry out socio-economic reforms and turn Iran into an Islamic democracy, rather than a clergy dictatorship.
Department of Defense ideologues adopted claims by some Iran political analysts that the failure of Khatami’s government and parliament to reform the regime engendered the rise of a “third force” in Iran made up of the younger generation, women, and students. They believe that, given a push, Iran’s clergy-dominated government would collapse “like a house of cards.” However, other scholars of Iran and foreign diplomats stationed in Teheran consider the claims about the rise of a “third force” in Iran to be grossly exaggerated. The non-clerical reform opposition, they claim, is amorphous, disunited, and lacks leadership.
It is evident that, driven by national pride, the Iranian reformers and masses will object to any American interference in their country’s affairs. On the matter of nuclear development, it has already become evident that Khatami’s government is fully supportive of the Iranian militants’ endeavors to gain nuclear capability. Khatami’s government openly opposes U.S. efforts to solve the Israeli-Palestinian strife as well. Indeed, President Khatami recently visited Lebanon (hosted by its premier and Syria) and was Hizballah’s guest of honor.
Disappointed by his total failure to implement his reforms, President Khatami last September submitted to parliament two bills meant to enhance his authority. The first was to enable the president to offset the ability of the conservative clergy’s Guardian Council (with veto power over all laws passed by the parliament) to vet candidates for parliamentary elections. The second was to endow the president with authority to overrule politically motivated verdicts of the radical clergy’s judiciary system, which have led to the repeated closures of reform newspapers and the incarceration of their journalists. Both bills were ratified by the parliament in the first month of 2003. Knowing well the position of the Guardian Council, Khatami declared that he would resign if his bills were turned down.
As expected, the two “presidential laws” were vetoed by the Guardian Council in April and May, respectively. Yet, neither Khatami nor his parliamentary supporters mention his resignation threat any more. Furthermore, the Iranian reformers are well aware that it will be hopeless to turn to the Expediency Council, which has the power to overrule the clergy’s veto, whose chairman is conservative former president Rafsanjani.
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Mordechai Abir is a Fellow of the Jerusalem Center for Public Affairs and Professor (Emeritus) of Islamic and Middle Eastern Studies at the Hebrew University of Jerusalem. His books include Saudi Arabia: Society, Government and the Gulf Crises (1993) and Saudi Arabia in the Oil Era: Regime and Elites: Conflict and Collaboration (1988).