<http://montages.blogspot.com/2007/10/privatization-iranian-style.html> Privatization Iranian Style
Iran's Press TV announces the privatization of state enterprises in the oil industry, claiming that "oil privatization in Iran can serve as a model for other regional countries" ("Iran, a Model for Oil Privatization," 7 October 2007). Is it true? If it were a model privatization according to the Washington Consensus, the business press should be jumping up and down and hailing Iran's power elite as if they were the AKP of Turkey, the West's favorite Islamist party, but they aren't. Why is that?
Note that the upstream sector, i.e. the exploration and production sector, is excluded from the privatization plan: "Iran's Oil Ministry Excludes 25 Companies from Privatization" (Tehran Times, 8 October 2007). In other words, Iran's government will be privatizing the enterprises that are normally not in the state's hands to begin with in other countries.
For international comparison of national oil companies and their upstream fiscal regimes, see Figure 1 on page 9 of Miranda L. Wainberg and Michelle Michot Foss, "Commercial Framework for National Oil Companies" (Working Paper, Center for Energy Economics, University of Texas at Austin, March 2007).
Click on the figure for a larger view. Upstream Fiscal Regimes
To top it off, this is what "privatization" in Iran looks like: "the fact the purchasers are themselves state entities casts doubt on whether this can be termed a real privatization."1 It's better to describe this as transition "from a state-held monopoly to a state-sanctioned oligopoly" as Daniel Brumberg and Ariel I. Ahram put it.2
This mode of "privatization" has complex effects:
* in the long term, it is likely to create a caste of
people who may eventually threaten the politico-
economic foundation of the Islamic Republic;
* in the short term, it gives power to the Bonyads
(religious foundations) and the Pasdaran (the
Revolutionary Guard) whose leaders, workers,
and beneficiaries are among the sectors of the
Iranian population who are the most ideologically
invested in the Islamic Revolution and its brand of
populism;
* in the medium term, it may help Iran's government
alleviate the following problem:
While the firm is obliged to give over 25 percent
of its profits from crude and (when prices are high)
a deposit to the oil stabilization fund, NIOC keeps
for itself revenues derived from petrochemicals,
gas, domestic sales of gasoline, and can make use
of gas for reinjection to revive older fields. This type
of arrangement provides NIOC with ample incentive
to continue to work on diversifying Iran's petroleum
industry, as any improvement in non-oil capability
will benefit NIOC directly. However, it also has the
potential for long-term conflict between state interests
in maximizing the revenue from oil, and NIOC
preference to focus on gas and petrochemicals as
more lucrative ventures. (Brumberg and Ahram,
pp. 30-31)
1 This is Privatization Iranian Style:
The Tehran stock exchange has broken its record for
the highest ever transaction on the nascent bourse
with the sale of shares worth over $1 billion dollars in
a state copper company, media reported yesterday.
Twenty percent of shares in National Iranian Copper
Industries were sold in less than seven minutes on
Wednesday for 10 trillion rials ($1.1 billion).
The purchaser was a consortium made up mainly of
state companies, including the pension funds of the
steel industry and state broadcasting, the reports said.
While the shares have been sold as part of the
government's ongoing privatization program, the fact
the purchasers are themselves state entities casts
doubt on whether this can be termed a real privatization.
Another 20 percent of the company would go on sale
in the next week, media reports said.
The deal easily tops the previous high set earlier this
year when the Iranian government sold almost $110
million worth of shares in a leading steel company.
Privatization program:
The state currently has a grip on over three-quarters of
Iran's economy and supreme leader Ayatollah Ali
Khamenei last year issued a decree envisaging a major
program of privatization.
Drawn up by the Expediency Council, Iran's top political
arbitration body headed by former president Akbar
Hashemi Rafsanjani, the plan aims to ease state control
over the economy.
The program set out by Khamenei to privatize 80 percent
of public and state institutions notably excludes firms in
the oil and energy sector as well as industries involved
in work connected to defense and security.
But President Mahmoud Ahmadinejad has been criticized
by observers for dragging his feet on privatization and
seeking to hand out a large proportion of the shares in
privatized companies as "justice" shares to the poor.
The Tehran stock exchange slumped following the
election of Ahmadinejad in 2005 but has recovered in the
last six months and in the last days topped the 10,000
points barrier. (Agence France-Presse, "Iran Bourse
Breaks Record with Billion Dollar Trade," Turkish Daily
News, 14 September 2007)
2 See "The National Iranian Oil Company in Iranian Politics," The Changing Role of National Oil Companies (NOCs) in International Energy Markets, Baker Institute Energy Forum, March 2007, p. 5. Go ahead and read the whole article, and you'll learn much about the faction fight between populists and neoliberals in Iran. The long and short of it is that Iran's populist President has been unable to defeat the oil mafia, and he won't be able to do so unless and until Iran's working people get ready to fight a good fight at the level they did at the time of Iran's Islamic Revolution, challenging nothing less than the authority of the Leader, the cornerstone of the political structure of the Islamic Republic. It is obvious that now is not the right time for that, what with Iran being the number one target of the empire.
On 10/14/07, bhandari at berkeley.edu <bhandari at berkeley.edu> wrote:
> Ahmadinejad whom he [Dabashi] considers "vastly superior"
> to the Shah and the mullah thugs!
That's what I have been saying all along: yes, Ahmadinejad is vastly superior to both the Shah and the most reactionary elements of the Islamic Republic.
Listening to most Western leftists, though, you would never realize that, and moreover you would never understand how exactly superior Ahmadinejad and his supporters are to the Shah and the Leader alike and why that is so. The man, like Chavez, is worthy of our critical support, imho, especially since he faces a lot more uphill struggle in Iran than Chavez does in Venezuela.
-- Yoshie