Iran: All the President's Men

Much as Venezuelan strongman Hugo Chavez took control of state oil company Petroleos de Venezuela, Iran's President Mahmoud Ahmadinejad is tightening his grip on the energy sector, appointing allies to key positions at the oil ministry and state National Iranian Oil Co. (NIOC). While the strategy may help Ahmadinejad expand his power base and boost his chances of election to a second four-year term in 2009, Iranian insiders say it will be at the cost of the oil industry, which is suffering the effects of sanctions and US pressure on Iran's financial system (EC Jul.6,p3). Ahmadinejad's decision this month to replace Oil Minister Kazem Vaziri-Hamaneh and appoint NIOC head Gholamhossein Nozari as caretaker was clearly designed to increase his hold on the ministry, Iranian industry sources say. Ahmadinejad now plans to nominate Nozari as permanent minister, subject to parliamentary approval, according to reports this week. "The president wants to bring in someone who is completely under his control to pave the way for his reelection," one industry insider says. "He wants to micromanage the oil industry, to dictate the fate of each project, to promote this or that company, and so forth." While Nozari hardly fits the bill of the "revolutionary" manager that Ahmadinejad has called for in the past to head the ministry, local analysts believe he will bend to the president's will. Still, Western oil companies, exasperated at the lack of progress with projects under his predecessor, are inclined to be positive about the more dynamic Nozari (EC Aug.17,p3). Nozari, who is in his early forties, has already made several appointments that Iranian sources believe were recommended by the president's office. Hossein Noghrehkar Shirazi -- a former ambassador to Norway and Austria, who has little experience in energy but enjoys good political connections -- was named deputy minister in charge of international relations, a position that involves liaising with foreign governments and companies. "He's a well-educated person and is a strong supporter of the system," says one businessman. Recently, Shirazi had headed the Tehran office of Naftiran Intertrade Co. (Nico), NIOC's Jersey-registered subsidiary that provides billions of dollars in financing for upstream projects. In another significant move, Nozari appointed Ali Vakili, the head of NIOC research division Ripi, as head of Pars Oil and Gas, which oversees the giant South Pars gas development. Vakili, who has no experience in managing energy projects, replaces Akbar Torkan, who returns to his former position as deputy oil minister for planning. Sources predict more juicy contracts could now be awarded to allies of the president. These include Ghorb Khatam, engineering arm of the Revolutionary Guard, which earlier won a $2 billion project for Phases 15 and 16 of South Pars, but is still looking for funding partners. Further changes are expected in the coming weeks, and a key man in the decision-making process will be Ahmadinejad's closest ally, Vice President Ali Saeedlou. Ahmadinejad nominated Saeedlou as oil minister shortly after becoming president in August 2005, but the choice was rejected by the Majlis (parliament). Saeedlou is deeply entrenched in the establishment, as a former director of the Defense Industries Organization, which oversees military procurement, and also of the Mostazafan and Janbazan Foundation, the largest of the secretive bonyads -- charitable foundations set up after the 1979 revolution, which report to Supreme Leader Ayatollah Ali Khamenei. Working with Saeedlou in the president's office is Sadeq Mahsouli, a former Revolutionary Guard commander, who was also proposed as oil minister in 2005, but failed to gain Majlis support. The rise of Ahmadinejad's allies signals the end of a long era, which lasted throughout the 1990s, when Iran's oil and gas industry was dominated by the network overseen by former President Ali Akbar Hashemi Rafsanjani, who allowed relatives and supporters -- most notably his son, Mehdi Hashemi -- to hold prominent positions and act as unofficial intermediaries with Western oil companies. Rafsanjani remains a powerful figure in his own right, but his hold over the oil establishment has now slipped. Paul Sampson, London Compass Points • SIGNIFICANCE: After setbacks when first elected in 2005, Iran's President Ahmadinejad is moving to tighten his hold on the oil ministry, as well as other key institutions like the central bank. This points to a reelection run in 2009. Supreme Leader Khamenei seems content to see Ahmadinejad flex his muscles, provided it does not undermine his own authority. • CONNECTION: The rise of the president's allies, composed largely of former Revolutionary Guard members in their forties and early fifties, will only stiffen Washington's resolve to isolate Tehran. Washington may soon label the Revolutionary Guard a sponsor of terrorism. • NEXT: Ahmadinejad will ring more changes at the oil ministry, extending political influence. Few expect progress in the sector, however, as tough local conditions combine with a tightening financial noose.