Iran's Parliament Approves Oil Minister

LONDON (Dow Jones Newswires), Sept. 3, 2009

Iran's Parliament Thursday approved the presidential nominee for the oil minister's portfolio, but the choice of a political loyalist may not be enough to secure much-needed foreign investment.

Masoud Mirkazemi, a commerce minister in the departing cabinet, has been confirmed by lawmakers after being proposed by President Mahmoud Ahmadinejad.

His arrival comes at a time of uncertainty for Iran following Ahmadinejad's contested re-election in June and threats of new international sanctions over its nuclear program.

Mirkazemi's nomination had been criticized because of his lack of experience in the oil industry. But some experts say his background in business and industrial strategy, and his ties with hardline circles could foster much-needed investment.

Iran suffers from chronic underinvestment in its oil production and refining sectors, which has been blamed on existing sanctions and the country's bureaucracy.

A former chancellor of Shahed University with a PhD in Industrial Engineering, Mirkazemi has a background in academia. "Somebody like him has a strategic point" of view and "can plan for the long term," said Mohammad Ali Khatibi, Iran's Organization of Petroleum Exporting Countries governor.

In addition, "there is a common area between commerce [his previous portfolio] and the international oil business," he said.

The oil industry is critical for Iran, OPEC's second largest producer, as it accounts for 80% of foreign revenues.

Like Ahmadinejad, the incoming minister is connected to the Islamic Revolution Guards Corps, of which he headed the Center for Strategic Studies. Through the voluntary force it commands, the ideologically driven militia has played a key role in suppressing protest against the president.

According to the U.S. Treasury, it also controls a business empire that includes a multi-billion dollar oil engineering company.

Manouchehr Takin, a senior analyst at the U.K.-based Center for Global Energy Studies, said that having the trust of the president will give him "authority to negotiate with foreign companies" without the risk of the deals being rejected by the head of state.

In recent years, Iran has discussed new multi-billion dollars gas deals with international oil companies -- such as Total SA -- with little result to date.

The talks have been hindered by international sanctions but the inflexibility of Iranian offcials has also taken its toll. In July, United Arab Emirates-based Crescent Petroleum said it would take Iran's state oil company to arbitration after the latter refused to deliver agreed gas supply following a pricing dispute.

Indeed, having the president's trust may not be enough to tackle the complexity of Iran's oil state sector. Mirkazemi is "not coming from the Petroleum Ministry will be a disadvantage in the first months as the Iranian petroleum minister has to take decisions on many operational and administrative matters," Takin said.

Cliff Kupchan, director at U.S. risk consultancy Eurasia Group, sees more downside than advantages in the new minister's profile. "Given his inexperience, decisions on oil and gas deals would likely become even slower," he said in a note.

On top of his lack of experience in the oil industry, Mirkazemi has also been criticized over his policies as a Commerce minister, facing lawmakers' attempts to impeach him over his management of sugar and rice imports.

Mirkazemi was one of 18 candidates approved by parliament after their nomination by Ahmadinejad. Three nominees were rejected.

The cabinet, which includes the Islamic republic's first-ever female minister, has been slammed by some lawmakers for favoring political loyalties over competence.  

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