Originally published in Journal of Political Risk, Vol. 3, No. 4, April 2015.
Revised version published in Journal of Political Risk, Vol. 4, No. 2, February 2016.
By Reza Yeganehshakib, Ph.D.
Reza Yeganehshakib holds a Ph.D. in history with a specialization in World and Middle Eastern history at the University of California, Irvine (UCI). He received a B.S. degree in Chemical Engineering from Iran Azad University, and an M.A. in history from UCI, where he serves as a Research Associate at the Samuel Jordan Center for Persian Studies. Dr. Yeganehshakib is a member of the Middle East Studies Association and the International Society for Iranian Studies. He is affiliated with the Persian Language Institute at California State University, Fullerton and was previously affiliated with the National Iranian Oil Company.
After nationalizing the oil industry in Iran in 1951, the government passed protectionist laws that restrained foreign ownership of Iran’s oil fields and industries. Since the Islamic Revolution in 1979, these laws have been reinforced to further reflect the anti-Western ideological underpinnings of the revolution. Yet, after the Iran-Iraq War and the beginning of the era of so-called “reconstruction” in 1988, the Iranian government adopted several laws to encourage foreign investment, particularly in the country’s largest industry, oil and gas. These laws, chiefly the Foreign Investment Promotion and Protection Act (FIPPA), despite having been revised several times, have not been successful in encouraging foreign companies to invest in Iran’s oil and gas industries. As a result, the government of the Islamic Republic of Iran recently announced that it would issue a new generation of oil and gas contracts, Iran Petroleum Contracts (IPC) that are more attractive to foreign investors. This paper investigates possible challenges that Iran’s protectionist laws may pose for these contracts, especially in light of Iran’s prevailing political and religious anti-West/anti-imperialist ideology and Iran’s distrust towards the West after the fall of Mossadegh’s government in 1953. It also studies Iran’s political and legal realities and whether they might provide foreign investors with attractive incentives, such as partial or conditional ownership of the industries, for investment.