Iran’s New Generation of Oil and Gas Contracts: Historical Mistrust and the Need for Foreign Investment

Iran Qatar Gas

In this Monday, July 19, 2010 file photo, portraits of the late Iranian revolutionary founder Ayatollah Khomeini, right, and supreme leader Ayatollah Ali Khamenei adorn a construction site which is part of the South Pars gas field, on the northern coast of the Persian Gulf in Assalouyeh, Iran. Iran’s President Hassan Rouhani said his country intends to increase production from a giant joint gas field shared with neighboring Qatar, state TV reported on Sunday, Dec. 1, 2013. The report quoted Rouhani as saying Iran that intends to match Qatar’s production by 2017. (AP Photo/Vahid Salemi, File)

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.

Abstract

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.

Background

After the nationalization of oil in Iran and its signing of the Consortium Contract in 1954, Iran decided to open itself to foreign investment and technologies for the purposes of exploration, drilling, and development of oil fields. For this purpose, Iran passed two laws: one in 1957 and another in 1974. These laws have been prepared and adjusted depending on the Iranian oil industries’ ability to manage different stages of operations in production. Oil and gas contracts were initiated with full foreign ownership of the reservoirs in 1901 and with the related operations within the framework of concession agreements. Based on these contracts, a foreign company assumed exclusive rights for all the oil it found in Iran. The first of these contracts was signed in 1872, as a form of full concession to Baron Julius de Reuters,[1] and then to 1901’s D’Arcy Oil Concession, which was valid for sixty years.[2] The following generations of the contracts have been arranged in different ways since Iranians acquired levels of know-how in order to manage the industry at various levels themselves. For example, at the time of the 1954 Consortium agreement, the Iranian Oil Company (founded in 1948) became the agent/operator of the oil industry for a period of 25 years.[3] Then, Iran started to take part in the oil industry in the form of common ownership and as the manager supervising operations (see Table 1). Later, in 1974, the contracts were transformed into service contracts. The corresponding law, passed after the 1973 oil crisis, abolished the 1954 law and nationalized the country’s oil reserves once again. This law determined that the only acceptable form of contracts were service contracts.[4] Based on these service contracts, the foreign investor would accept the full responsibility of any risk involved in the exploration phase. If a commercial-scale field were found, the contractor would start the development and production phases. On the contrary, if no commercial oil field was found, the contractor lost its investment and the host country was not responsible for any of the exploration costs. Yet, all the development and production processes were supervised and managed by the National Iranian Oil Company (NIOC). When the exploration phase ended successfully, NIOC signed another contract with the foreign company in the form of a sales contract, which was valid for, at most, 15 years. The contractor would pay the market value of about 40-50% of the oil produced from the reservoir to NIOC. However, based on Iranian laws, a 3.5-5% discount was included in the price so that the contractor could retrieve its investment and operational costs, known as “cost oil.” This encouraged contractors to use the best technologies available and work as efficiently as possible to continuously produce oil at an acceptable rate and recover the “cost oil” before the end of the contract term.

Since the 1979 Iranian Revolution, the only contracts that NIOC has offered have been buy-back, or service, contracts. The Iranian oil ministry has not approved any contracts that provide a foreign entity with ownership or co-ownership. Nor has it offered the management to foreigners since the birth of the Islamic Republic in Iran. Moreover, the constitution of the Islamic Republic does not allow foreign ownership of the reservoirs, because they are state property.[5]
Iran has offered four generations of buy-back contracts since the 1979 Revolution that together showcase the government’s attempts to make foreign investment more attractive. Because Iran is in constant competition for investment with the other oil producers in the world market, especially those in the region such as Iraq, Saudi Arabia, and Kuwait, NIOC must always think about making the contracts more attractive to encourage investment in Iran. Yet, Iran’s political isolation yields heightened political risks relative to many of its neighbors, particularly given persistent fears that tensions with the West may adversely impact its business environment.

Table 1Oil and Gas Contracts

The first generation of the contracts was a simple buy-back agreement between NIOC and a foreign company (Table 2). These contracts had a fixed price for the service that the foreign company provided as a contractor. If, during the exploration phase, a contractor found a commercial oil field, it would not necessarily become the developer of the field since that contract would be rewarded separately. [6] This may have caused a low level of interest among international companies since they couldn’t be certain about recovering the operations costs and capital investments during exploration. There were also several ambiguities about each party’s responsibilities and shares of the produced oil during the production phase.

Table 2

The second generation of the oil buy-back agreements, similar to the first generation contracts, also covered all phases from exploration to production in different contracts that were not necessarily given to the same contractor (Table 3). Moreover, if the contractor was able to successfully finish the exploration phase, it could directly, and without a new contract, go to the development phase, but at a fixed and predetermined price. This may also have caused several problems since the cost of the operations, in reality, is volatile and could therefore have negatively affected the contractor’s investments.

Table 3

However, these contracts also failed to effectively compete with the contracts that Iran’s neighboring countries offered at that time. Like their predecessors, these contracts also lacked clarity in defining each party’s responsibilities and shares in the production phase. It also caused tension between the contractor and the reservoir owner over ambiguities, such as how the tender was executed and the way the costs had been calculated in the FEED phase.

Table 4

The third generation of the contracts was very different from the first two generations (Table 4). In these contracts, both the exploration and development phases were included in a single contract while the cap on the price of the contract was determined at a public tender. Therefore, the deal was an open tender contract,[7] with an open capex or open capital expenditure. [8] The cap on the expenses was determined after the Front End Engineering Design (FEED) and the public tender phases. [9] This determined number was an initial estimation and was changed during different phases of the operation depending on the cost of the operation. Similar to the previous generations, the contractor had no ownership of the oil and gas inside of the reservoir.[10] Transferring the technology according to a predetermined plan was also included in this generation of contracts.[11]

Lifting any financial, technical, and legal obstacles within the boundaries of the approved international laws to expand Iran’s cooperation with major oil companies.The recently elected Iranian president, Hassan Rohani, described the most outstanding specification of the new generation of the oil contracts at the 44th World Economic Forum in Davos, Switzerland, in January 2014. It was as follows:

  • Making the contracts and the projects more attractive to the international oil companies and encouraging them to cooperate with Iran in exploration and development, especially in increasing the efficiency of the recovery operations, as well as expanding managing, financial, and technical cooperation.
  • Transferring modern technology to Iran’s exploration and production industries and helping to increase domestic capabilities, so that the Iranian companies can participate independently – or in partnership with other multinationals – in the global oil and gas market and industry.[12]

The Government of the Islamic Republic of Iran eventually passed and released the Iran Petroleum Contract Bill (IPCB), which defines the general structure of the upstream oil and gas contracts, on September 30, 2015. The Iranian Ministry of Oil put this law into effect on November 14, 2015 (Table 5).[13] The government called these contracts Iran Petroleum Contracts (IPC) rather than buy-back or service contracts. The reason for this new naming is to highlight the difference that these contracts are going to have in comparison to their service contract predecessors, particularly in terms of rewards and clarity. In all these contracts the first party or employer is Iran’s Ministry of Oil and the second party is the contractor (Article 1, Sections 10 and 11).

In IPC, contractors are paid based on each barrel of oil produced.[14] Besides the contract price, there will be rewards (Fee, according to Article 1, Section 20) paid for each excess barrel of oil, each 1,000 cubic feet of natural gas or each barrel of gas condensates produced in addition to the minimum agreed production amount.

According to IPCB Article 2, Section 1, if a contactor is successful in finding a commercial-scale field or reservoir, it will receive the consecutive phases of the operation contracts, including development and production. Minimum exploration requirements and the timeline of the agreement should be clear in all the contracts as well.[15] There is also less ambiguity in these contracts about the production phase, especially since the costs are not fixed and the cap in each phase will be determined periodically (Article 1, Section 27 and Article 8, Section 5). Moreover, all the contractor’s expenses including Direct Capital Cost (DCC), Indirect Cost (IDC), Cost of Money (CoM), Fees, and Operation Costs (Opex) should be covered by a fraction (maximum 50%) of the produced oil and gas from the field or the profits made by the execution of the contract based on the actual price of the produced oil or gas at the time of the payback (Article 3, Section 3).[16] If the Iranian Ministry of Oil decides to decrease the production for any reason, except for technical issues in the field or reservoir, it shall start that reduction from those fields or reservoirs that are not used to cover the contractor’s costs. If the Ministry decides to do this decrease from a field or a reservoir that is used to cover contractor costs, this should not impact the Ministry’s payments to the contractor to cover its costs (Article 3, Section 10).

Similar to the previous contracts, the contractor has no ownership of the oil and gas inside of the reservoir (Article 3, Section 1). However, the foreign investors can sign production contracts with a duration of up to 25 years.[17]

Table 5
According to Mehdi Hosseini, the head of the Iranian Oil Ministry’s revising contracts taskforce, this ministry has prepared a new generation of oil contracts that completely protect Iran’s “national interests” while providing better incentives for foreign investors. For instance, these contracts have a 15-16% turnover rate for the investor. Although making prioritization based on the success of the exploration phase is not new and had already started during President Mahmoud Ahmadinejad administration, the new oil field development and exploration contracts are a bit different from those in the past.[19]  In particular, they will be modified based on the oil reservoirs’ conditions, meaning that the development operation changes based on the reservoirs’ behavior. Therefore, there is no cap for the investment allocated to the costs of development since it varies based on the reservoir’s actual condition. The oil ministry reviews the reservoirs’ condition each year, estimates the required costs and submits the results to the contractor (Article 1, Section 28). Moreover, the contractor is required to utilize the latest technologies in each year of the development phase. The profit in the new contracts will not be a fixed number, but will be determined based on the production rate and will increase with a growth in production.In traditional buy-back contracts (1990s-early 2000), if a company failed to find oil after an exploration project, the contract would automatically become null. But in the new contracts (IPCs), if an investor fails to find a commercial-scale reservoir, it is given another opportunity to perform further exploration work until it finds one. According to Article 6, Section 2, Subsection 2, although the contractor (the second party) accepts all the risks of exploration, if the exploring contractor is not successful in finding a commercial-scale field or reservoir, another exploration block will be assigned to it with the same conditions stated in the original contract. This helps to reduce the high-level of risk for foreign partners involved in upstream energy investments.[18]

Narratives on “national interests” play a significant role in publicizing these contracts. The head of the Iranian Oil Ministry’s revising contracts taskforce also said that signing the win-win contracts is the ministry’s priority with regard to protecting the “national interests” of the country.[20] Hosseini has also emphasized that these contracts will not be arranged in a way that creates “ownership” for any foreign company. Developing shared oil and gas fields have priority in upcoming tenders, while increasing the recovery rate will be the second priority.[21] According to Bijan Namdar Zanganeh, the Iranian Oil Minister, the purpose of these contacts is not only to attract foreign investments, but also to receive the latest technologies in oil and gas upstream sector.[22] In IPCB, the protective production also has been emphasized in different parts, including Article 1, Section 4; Article 2, Sections 1; and Article 3, Section 6.

Iranian Contracts and International Investors

In the new IPC, the contractor is responsible for all the exploration operations, such as seismic monitoring and drilling, while it must also assume all the risk for finding a commercial-scale oil field. The value of the oil and gas that has been produced in Iran through the first three generations of service contracts is about $100 billion. Iran still needs foreign investment for developments in the oil and gas industries, particularly in exploration and drilling operations, which not only require massive investment, but also involve taking serious financial risks. [23] According to the Iranian Oil Minister, Iran needs at least $50 billion to raise its production to 5,700,000 barrels per day. Iran’s oil production activities have been recently focused on its shared fields with Iraq, from which Iran wants to raise the production to 700,000 barrels per day. Iran also hopes that it can complete all the unfinished phases of the South Pars gas field in three years and increase its natural gas production by 800 million cubic meters. The Iranian oil ministry is trying to raise funds for these massive projects by encouraging foreign investment.[24]

Currently there are several exploration blocks in various parts of Iran with a minimum of 70% probability of successfully producing oil. For instance, Iran is able to produce 700,000 barrels per day oil from the West Karoun River region (Azadegan, Dar-Khovin, Yaran and some other fields) with the help of international companies. This region’s capacity could be further increased to 1,000,000 barrels per day in less than four years. Iran could also increase the recovery rate at its massive oil fields such as Ahvaz Asmari, Maroun Asmari, Bibi Hakimeh, Gachsaran, Aghajari, Rag Sefid, Mansouri Asmari, Pazanan, Karanj, Parsi, and Shadegan.

Iran is highly interested in attracting foreign investors to renovate its oil and gas industries, as well as increasing production and oil and gas exports. At the 44th World Economic Forum in Davos, Switzerland in January 2014, Rohani provided a general description of the current status of Iran’s oil and gas industry and its need for foreign investment. He invited international oil companies to invest in Iranian projects to build new Liquefied Natural Gas (LNG) facilities so that their output could be used as a feedstock for petrochemical plants. Rohani also described the South Pars as the world’s biggest independent gas field, as it currently has 10 active phases and 17 developing phases with a capacity of 450 million cubic meters natural gas, and is capable of producing 700,000 barrels per day of gas condensates. Iran also has plans to build LNG facilities to export LNG to geographically distant markets, and needs $75 million to expand its petrochemical industries over 8 years.[25] Nowadays, the share of renewable energies in the global market is less than 10%, while for the next two decades fossil fuels will still provide at least 65% of the world’s total energy supply. Iran has the world’s largest gas reserves and, over the past century, the country has proven that it can be responsible for supplying the world with oil and gas in a timely fashion. It hopes the global need for energy and Iran-P5+1 nuclear agreement (Iran Deal) will provide Iran with a better opportunity to expand its economic relations with the Western powers.[26]

Iran also has a series of lucrative oil and gas deals with oil consumers in Asia. According to the Japanese Ministry of Economy and Trade, in February 2014 Japan increased its oil imports from Iran by 21.7% compared to the previous year. This is equal to 260,828 barrels per day.[27] Yet, in July 2014, Japan decreased its imports by 24.4% to 129,990 barrels per day. Overall, Iran increased its exports to its customers in Asia by 29.4% in 2014. Iran’s biggest customer in Asia is China. In the period from January to July 2014, China purchased 617,670 barrels of oil per day from Iran, which represents a 200,000 barrels per day increase in comparison to the same period in 2013. In July, China increased its oil imports by 40.6% (558,865 barrels per day), which shows a consecutive 8-month rise in its imports from Iran. As with China, India dramatically increased its imports of oil from Iran. Although India decreased its import due to insurance issues in 2013, New Delhi increased its imports by a factor of six in July 2014 (210,300 barrels per day). In contrast to these countries, South Korea decreased its oil imports from Iran by 31.6% in July 2014 to 130,226 barrels per day.[28]

Iran may increase its oil exports, especially if sanctions are lifted and investment grows. Yet, the oil prices may go down in the long-run because of the influx of more oil onto the global market. Moreover, as a result of the emergence of new oil producers, Middle Eastern oil has begun to gradually lose its importance in the global market. The market has also been going through increased fluctuation in recent years, especially as a result of the exploration of new shale oil and gas reserves. For example, the expansion of Brazil’s Petrobras’ deep-water drillings in the Atlantic affected the prospects of a high and stable oil prices.[29] But, the current oil price, regardless of the recent months’ price declines, still made the exploration and drilling operations profitable endeavors. Oil production is still above the breakeven point, which means the cost of the production remains below the spot price. But, oil production is a less lucrative option compared to LNG, because of the low oil prices on the market and the significantly lower breakeven point of LNG compared to crude oil. [30] This is why Iran is aggressively seeking investment for its LNG facilities, particularly since Iran’s production costs are relatively low compared to those of other oil and gas producers.

The Iranian oil and gas industry, regardless of all the opportunities, has faced several issues in dealing with foreign companies, particularly after the intensification of sanctions in the mid-1990s. For example, Iran has had several problems with Chinese companies. Iran had to set a final deadline for a Chinese company that did not finish its project of developing the Yadavaran oil fields that Iran shares with Iraq after six years. The two parties also could not reach an agreement to cooperate on other negotiated projects, such as the development of Iran LNG’s 2nd phase, finishing the exploration of Garmsar oil field, the partial development of Resalat oil field in the Persian Gulf, constructing drilling towers, and some other projects in refineries and petrochemical facilities.[31] Chinese companies that had initially showed interest in participating in the Iran-Pakistan pipeline project (IP project), but had withdrawn due to fears of its adverse impacts on their deals with the Arab countries in the Persian Gulf and the effects of the U.S. sanctions in 2012, have only just recently showed new signs of their renewed interest in the project.[32] China agreed to increase its quota for Iran-owned projects from $25 billion to $50 billion, though no real action has been taken yet.[33]

Royal Dutch Shell also has about two billion dollars in debt to Iran that cannot be paid due to international sanctions. The debt is a result of their purchase of about eight million barrels of Iranian oil in four deliveries. In one of the payments, Shell had to pay Iran back by sending crops and medication to avoid punishment from the United States for violating sanction laws. Similarly, Gazprom, which had been cooperating with Iran in the 2nd and 3rd phases of South Pars gas fields, left the country immediately after the intensification of sanctions in March 2011. Neither of the other two Russian oil companies in Iran, Lukoil and Tatneft, respected their agreements with the government.[34]

The situation of Italy’s Eni is similar to that of the Chinese, although during the sanctions it did not stop buying Iranian oil within the framework of buy-back contracts. Eni had a contract for developing the 1st and the 2nd phases of the Darkhovin field. Eni also wanted to sign contracts for developing the 3rd phase of Darkhovin and the 19th phase of the South Pars fields, and negotiate the gas trade with Iran before the intensification of the sanctions.[35]

Norway’s Statoil was also among the companies that ignored the sanctions and continued to purchase Iran’s LNG and natural gas condensates as stated in its contract for the development of the 6th and the 8th South Pars fields. Before the sanctions, it also cooperated with NIOC in developing three phases in the South Pars, exploring the Anaran block, especially the Azar shared oil field, and creating an exploration project in Khorramabad block.[36]

France’s Total has had a long history of cooperation with Iran since the 1990s. Total signed buy-back contracts with Iran and executed the developments of the A and E Siri gas fields in 2005.[37] The company also signed contracts for developing the 2nd and 3rd phases of the South Pars fields along with Malaysia’s Petronas and Russia’s Gazprom after the Iran Oil Sanctions Act of 1996 (D’Amato).[38] Christophe de Margerie, the former CEO of Total who died in airplane crash in Moscow in October 21, 2014, said that the Iranians were confident that the sanctions would be lifted. He stated that Total left Iran in 2009 after the escalation of the sanctions and predicted that any possible return would be after 2017.[39]

France’s Total and Italy’s independent refiner Saras visited Tehran in December 2013, only a few weeks before the 44th Davos World Economic Forum.[40] During this visit, the CEO of Eni, Paolo Scaroni, stated, “The best way for companies like us to go back to Iran is to follow strictly the sanctions and push both parties to reach an agreement, which will lead to the lifting of sanctions one day.” The United States and its Western allies’ officials, as well as their oil and gas industry leaders, tried to “hold the line” by meeting with the Iranian officials during the World Economic Forum.[41] France’s GDF Suez Energy also showed a great deal of interest in returning to Iran.[42] Moreover, after the Iran Deal, there has been a continuous series of visits by American and other Western companies’ representatives and top-ranked officials to Iran to expand future business and trade.[43] Besides introducing the IPC, Iran conducted several negotiations with gas exporting country leaders at the third forum of the Gas Exporting Countries Forum (GECF) in Tehran in November 2015.[44]

table 6In Iran, each oil and gas contract begins with a prioritization of the projects, after which a price assessment is performed. Then, NIOC prepares a technical report, announces it to the public and sets up a tender opening session. Next, NIOC prioritizes the propositions and submits them to the Commission for Special Service Contracts’ Plans at the Oil Ministry. Then, after the approval of the executive committee at NIOC, the contract is submitted to the Service Contracts Supervision Committee, which includes: three parliament members, the Deputy Minister of Economics and the Treasury, the Deputy Minister of Foreign Affairs, the Deputy Minister of Industry and Mines, the Deputy Oil Minister, and the President’s representative. Finally, after all of these steps the contracts are ready to be signed, following the approval of the Central Bank’s Economic Council and Central Bank’s Financial Contracts Division.[46]Legal Barriers

Besides these procedural complexities, the IPCB itself is not without issues. According to Article 3, Section 1, the government of the Islamic Republic of Iran has the absolute and exclusive right of ownership of the oil and natural gas resources and reservoirs. The article states that the Ministry of Oil shall enforce and practice this right in all contracts. Article 11, Section 5 specified that the oil, gas, gas condensates or any material manufactured as a result of the production operation is the property of the first party, which is Iran’s Ministry of Oil (employer). This simply means that the contractor should heavily invest in all the operations from the preliminary phases (exploration) to the development and production stages, but it has no ownership right over either the equipment or the produced oil and gas. Moreover, according to Article 3, Section 7, all the operations the contractor performs are under the supervision, ownership, and on behalf of the First Party, and all the assets such as buildings, goods, equipment, wells, and installations, including those above- and underground, belong to the Iranian Ministry of Oil from the beginning date of the contract.

Based on Article 3, Section 3, all the contractor’s expenses (costs) including Direct Capital Cost (DCC), Indirect Cost (IDC), Cost of Money (CoM), Fees, and Operation Costs (Opex) should be covered by a fraction (maximum 50%) of the produced oil and gas from the field or the profits made by the execution of the contract based on the actual price of the produced oil or gas at the time of payback. This creates some issues for the investors, who are generally more interested in the value of the product than the product itself. As mentioned previously, not only will the contractor’s expenses be paid back from a maximum 50% of the produced oil and gas, but also the “fee” (reward) is determined based on the actual price of the oil or gas at the time of production. The current trends in the global oil market, especially the currently oversupplied market, are indicators of fluctuations in the value of these resources based on which all the rewards and paybacks are calculated. Particularly, after the “adaptation date” of the Iran and P5+1 Joint Comprehensive Plan of Action (JCPOA) in October 18, 2015, [47] there is a strong expectation for Iran to increase its oil and gas input onto the global market, which will put more pressure on the oil and gas spot prices.

As the forecasted Iranian oil enters the global market, if the other oil producers do not decrease their production and demand does not increase, we should not expect any significant increase in the value of produced oil and natural gas, which will result in a lower price for paying back the investors.

One of the other issues is the way the Joint Operating Company/Joint Operating agreement has been set up. As stated in Article 1, Section 21, the contractor (second party) has to have an Iranian subcontractor/partner with which it will work during the operational phases, including development and production. In the early stages of the cooperation, the management power will rotate between the Iranian subcontractor and the second party until the foreign contractor (the second party) gradually transfers the decision-making power and technology to the Iranian subcontractor/partner. However, this joint agreement will not reduce or eliminate any of foreign contractor’s  responsibilities and it shall remain responsible for all of its obligations. This regulation also defines when the Iranian subcontractor (the third party) should assume its responsibilities.

Article 11, Section 1, Subsection 1 describes a specific example of this type of situation. If the Employer (First Party/Ministry of Oil), decides that it is necessary to employ an Iranian subcontractor that is usually an NIOC’s subsidiary, during the production phase of any Brown Field or Brown Reservoir, a Joint Operating Agreement will be signed between the second party (contractor) and the NIOC’s subsidiary. The purpose of this Operational Agreement is to assist the contractor in fulfilling its duties in the production phase. The NIOC’s satellite company must follow all the contractor’s operational guidelines and rules. If NIOC’s subsidiary violates any of the foreign contractor’s rules, this will be considered as the first party’s (employer’s) violation of the agreement. Consistent with the regulations pertaining to the Joint Operating Company and Joint Operating Agreement, whenever the first party decides to include a third party (its satellite company) in the operational phase, the contractor must consent and sign an agreement with the third party, even if the second party is not confident in the capabilities of the third party or does not wish to work with it.

However, these joint agreements do not reduce or eliminate any of foreign contractor’s responsibilities, as it will remain responsible for all of its obligations. In order to create an environment of confidence for a foreign investor, the law should bestow decision-making power to the second party in this section; otherwise, any failure in the production operations the third party causes may have negative impacts on the second party’s fulfillment of its responsibilities. This change would also be beneficial for the first party because after the foreign contractor’s approval of the third party, any further failure in production would be foreign contractor’s responsibility, and not the result of an imposition of an NIOC subsidiary that the contractor did not want to work with in the first place.

One of the biggest uncertainties for foreign investors is the legal system in Iran. Currently, international law that contrasts with local law is not enforceable. Similarly, there are no legal grounds for enforcing any verdict or decision of an international court. In reality, in all countries international law and decisions cannot be used directly as the initial format of contracts, as the format is imposed on the contract from the beginning and frames the legal behavior of both parties. It is only after the implementation of the local laws and internal regulations that relevant international laws can be applied, generally when there is a gap in the local laws and regulations. For example, if there is an unresolved issue between parties that is due to the lack of domestic laws or regulation pertaining to that case, then international law can be used to resolve that particular case.[48]

Moreover, oil and gas reserves are part of anfal (commonly owned resources) under Iranian law. According to most of the Shi’ite marjas (Jurists), including Ayatollah Khomeini, the leader of the Muslim society (the Vali-e Faqih) is in charge of the anfal since they do not have any specific private owner.[49] The Islamic Republic of Iran’s Constitution also defined anfal accordingly in its 45th section and put the Islamic State (leader representing the state) in charge of them.[50] According to Seyyed Mehdi Hosseini, the head of the committee that revises oil investment contract models, “The ownership of the reservoir belongs to the people and cannot be transferred.”[51] This is a barrier to any production sharing agreement (shared production), which is among the most attractive contracts in the oil and gas industries and what makes IPC relatively less attractive compared to PSA.

Historical Mistrust

The study of the Iranian officials’ narratives on oil and gas contracts, as well as any subject that deals with foreigners, shows a great deal of suspicion and mistrust of the foreigners’ words and actions. For instance, it is common for Iranian officials’ speeches and interviews to invoke the themes of national interest and imperialist powers.[52] Public recollections of the 1953 coup, the nationalization of the state oil industry, which have been massively broadcasted by the state-owned media and privately-owned newspapers have been an important part of the national and Shi’ite-Iranian identity since the 1979 revolution.[53] The role of ulama (Shi’ite top-ranked clerics and jurists) has materialized in Ayatollah Kashani, who is one of the two leaders that nationalized Iran’s oil industry. To highlight the role of ulama, sometimes their part has been overemphasized in the Islamic Republic’s media, because Mohammad Mosaddeq was a relatively secular figure compared to Kashani. For the Iranian decision-makers, these events are not simply memories, but vivid lessons from the past that should be repeated frequently to prevent making the same mistakes. The idea of “the mistake” is simple: trusting westerners.[54] All Iranian officials in more recent administrations, particularly those in charge of preparing the new generation of the oil contracts, have emphasized the importance of protecting Iran’s national interests. Also, it seems that the current decision-makers in the Oil Ministry are fully aware of the parliament members’ accusations against their pre-1979 predecessors of not fully protecting the national interests of the Iranian people. Therefore, to avoid receiving such accusations again, members of the Oil Ministry are purposely hard for the foreigners to negotiate with to depict themselves as the protectors of the Iranian state and its interests.

Discussion

The ongoing Western sanctions against Iran have not only affected the upstream oil and gas industries but also downstream industries like petrochemicals. For instance, Iran has faced serious difficulties in supplying catalysts to its gasoline production facilities. In some cases, the companies that had contracts to develop and renovate the Lavan, Shazand, Abadan, and Tabriz refineries left Iran after the intensification of the sanctions. Likewise, in 2014 the U.S. UOP Company did not deliver catalysts needed for gasoline production to the Isfahan refinery.[55]

The other serious issue sanctions cause is the restriction in transferring funds to Iran. If these sanctions are not lifted, foreign buyers of Iranian oil and gas will face serious difficulties in doing business with Iran.[56] The Office of Foreign Assets Control (OFAC) at the U.S. Department of the Treasury began to issue exemptions for some international oil buyers, but problems pertaining to the other types of the contracts, such as catalysts, technologies, development in refineries, and several other fields, remain unresolved. Due to these difficulties, Iran has severely suffered from the lack of foreign investment, advanced and up-to-date technologies, tools, and supplies during the last decade. This makes Iran a lucrative destination for foreign contractors after the implementation of JCPOA in 2016.

To provide foreign investors with a secure environment that guarantees the safety of their investments and profit, the issues related to the protectionist laws and the judicial system’s favor of domestic powerful state-related entities should be resolved. Although IPC is more attractive in comparison to its service contract predecessors, in order to improve them and move towards pseudo-sharing production contracts, legal obstacles should be removed, particularly those that forbid foreign ownership of reservoirs. For example, new laws should protect the safety of investments in the development and production phases to pave the way to pseudo-sharing production agreements where the investor is also a partial owner of the reservoir or produced oil. The laws should also be revised so that all foreign investors and domestic entities, particularly the Bonyads and IRGC, have equal rights and responsibilities. Moreover, at the time of public tenders, the Oil Ministry should provide all parties with an equal opportunity and equal treatment when assessing the suggested prices in tenders.

Besides addressing the above issues, the laws pertaining to anfal should be referred to the Guardian Council and be reinterpreted in favor of foreign investors interested in owning hydrocarbons inside the reservoirs as well as produced oil and gas. Some fatwas from ulama may also be needed to supplement the Guardian Council’s interpretation, and these reforms will additionally require the Parliament’s and the Council of Expediency’s cooperation. The Parliament and the government should chiefly work on passing more detailed laws and regulations that pave the way to ensuring the security of investments and encouraging foreign ownership of the oil inside the reservoirs and/or produced oil and gas.

Historical distrust of the “West” and what Iranian government-sponsored media have called for years “imperial powers” is a historical obstacle to revising any law in Iran. In particular, the memories of both the 1953 coup and the nationalization of the oil industry are still vivid and act as barriers to giving international companies any ownership of Iran’s resources. This suspicion has been reinforced by the memories of the 1980-1988 Iran-Iraq War and the U.S. backing of the Saddam Hussein regime. The Iran-U.S. conflict in the Tankers’ War in the Persian Gulf in 1986-1988 during the last two year of the Iran-Iraq War is another memory that remains with Iranian leaders and lawmakers.

Nevertheless, these memories have been formed over time and are subject to change. For instance, despite the harm Russia inflicted on Iran during the 19th and 20th centuries, Iran-Russian relations are now quite strong. Imperial Russian forces separated massive parts of Iran and appropriated them to Tsarist Russian in 1813 and 1828 (Treaties of Gulistan and Turkmenchay). Soviet forces also invaded Iran during World War II. Yet, more recently, Iranian leaders have enjoyed relatively good relations with Russia, as if none of the past Russian offenses had ever happened. Similarly, the current warming of Iran-Iraq relations displays the people’s ability to put away the past and look to the future, regardless of their memories from eight years of war.

With this in mind, it is possible that a similar about-face in Iranian-American relations could occur in the coming months and years. Iran, the United States and other Western powers finally came to an agreement to stop Iran’s military nuclear activities in exchange for lifting the sanctions. They have also been able to build some trust in recent years through security cooperation against the Taliban and Al-Qaeda in Afghanistan, as well as against ISIL in Iraq and Syria. Should Iran-U.S. cooperation continue on these and other fronts, it is very probable that Iranians can put away their historical tensions with the United States and open the door properly to Western investors.

Anders Corr, Sarah Becks, and Matthew Michaelides provided editorial oversight for this article. JPR Status: Working Paper, originally archived 4/2/2015. Newly archived 2/10/16.

Footnotes:

[1] This agreement gave de Reuters exclusive rights and monopoly to use all the Iran resources in mines, coal oil, etc. The agreement was signed by Nasir al-Din Shah Qajar to be valid for seventy years but was cancelled only a few years later due to a massive pressure from the Russian Empire and the Iranian elites. See: Roxane Farmanfarmaian, War and Peace in Qajar Persia: Implications Past and Present, (Oxon: Routledge, 2008); R. P. D. Davenport-Hines and Geoffrey Jones, British Business in Asia Since 1860, (Cambridge: University of Cambridge, 1989) 35; Geoffrey Jones, Entrepreneurship and Multinationals, (Cheltenham: Edward Elgar Publishing, 2013), 112; James Buchan, Days of God: The Revolution in Iran and Its Consequences, (New York: Simon & Schuster, 2012), 8-9.

[2] B. S. McBeth, British Oil Policy 1919-1939, (London: Frank Cass & Co. Ltd., 1985), 6; Maximilian Kuhn, Enabling the Iranian Gas Export Options: the Destiny of Iranian Energy, (Berlin: Springer, 2012), 280-283, 349-355; Stephanie Cronin, Tribal Politics in Iran: Rural Conflict and the New State, 1921-1941, (Milton Park: Routledge, 2007), 137, 151, 154; Arash Khazeni, Tribes and Empires on the Margins of Nineteenth Century Iran, (Seattle: University of Washington Press, 2009), 117-122, 125, 148, 151.

[3]An original copy of this agreement is available at Wikimedia. Look under the original title: “The Iran-Consortium Agreement of 19-20 September 1954,” http://upload.wikimedia.org/wikipedia/commons/0/03/Consortium.pdf; Charles Nelson Brower and Jason D. Brueschke, The Iran-United States Claims Tribunal, (The Hague: Kluwer Law International, Publishers, 1998), 257, 423; John W. Limbert, Negotiating with Iran: Wrestling the Ghosts of History, (Washington D.C.: United States Institute of Peace, 2009), 72, and 78-80; Kristen Blake, The U.S.-Soviet Confrontation in Iran, 1945-1962: A Case in the Annals of the Cold War, (Lanham: University Press of America, 2009), 98-99; Gholam Reza Afkhami, The Life and Times of Shah, (Berkeley: University of California Press, 2009), 274, 339.

[4] Nima Nasrollahi Shahri, “The Petroleum Legal Framework of Iran: History, Trends and the Way Forward,” China and Eurasia Forum Quarterly, vol. 8, no. 1 (2010) pp 111-126, 117-118, and 123; Xiaobing Li and Michael Molina, Oil: A Cultural and Geographic Encyclopedia of Black Gold, (Santa Barbara: ABC-CLIO, 2014), 197, 546-547; Allahyar Mouri, The International Law of Expropriation as Reflected in the Work of Iran-US Tribunal,  (Dordecht: Kluwer Academic Publisher, 1994), 196-197; 9-10. Leila Zabbah, “Investment Challenges in Iranian Oil and Gas Sectors-A Legal Approach,” Doha Natural Gas Conference and Exhibition, http://www.dohagascon.com.qa/dgc/dgc.nsf/dbb362b1299b2e95432572830028cb44/0fa9efe18b343ed84325739b00319e9d/$FILE/Leila%20Zabbah%20%20Full%20Paper.pdf.

[5] Roger Howard, Iran Oil, The New Middle East Challenge to America, (New York: I. B. Tauris, 2007), 33-38; Christian Campbell, Legal Aspects of Doing Business in the Middle East 2006, (np: Yorkhill Law Publishing, 2006), 75-79.

[6] “roonamayee az avalin gharardad-e finance-e dakheli,” Danesh-e Naft, December 1, 2010, accessed: September 10, 2014, http://www.daneshenaft.ir/cid/CMSContent/content/3887.

[7] A bidding process that is open to all qualified bidders and where the sealed bids are opened in public for scrutiny and are chosen on the basis of price and quality. Also called competitive tender or public tender. See: “open tender” in Business Dictionary, Web Finance Inc., 2014, accessed: September, 9, 2014, http://www.businessdictionary.com/definition/open-tender.html#ixzz3FhBVAN41.

[8] “vagozari-e bazaryabi-e naft be peymankaran-e khareji dar nasl-e jaded-e gharardadhaye nafti,” Ayar Online, February 2, 2014, accessed: August 1, 2014, http://ayaronline.ir/1392/11/46873.html; A capital expenditure (Capex) is money invested by a company to acquire or upgrade fixed, physical, non-consumable assets, such as buildings and equipment or a new business. There are two types of Capex – those that are invested in to maintain existing levels of operation within a company and those that are invested in something new to foster future growth. Customarily, regardless of the manner of investment, Capex is money spent with the intent of initiating future cash flow and a substantial return on investment (ROI). Capex’s counterpart, operational expenditures (Opex), refers to the day-to-day costs of operation. A similar but not closely related term, forex, stands for foreign exchange. See: “Capex” in whatls,Tech Target, 2014, accessed: September 9, 2014, http://whatis.techtarget.com/definition/CAPEX-capital-expenditure;  “Capex vs. Opex” in Diffen, 2014, accessed: September 9, 2014, http://www.diffen.com/difference/Capex_vs_Opex; “nasl-e aval ta sevom-e gharardad-haye bey’e moteqabel dar san’at-e naft,” Bultan News, November 9, 2013, accessed: July 18, 2014, http://www.bultannews.com/fa/print/176844.

[9] “roonamayee az avalin gharardad-e finance-e dakheli,” Danesh-e Naft, December 1, 2010, accessed: September 10, 2014, http://www.daneshenaft.ir/cid/CMSContent/content/3887.

[10] Ibid.

[11] Ibid.; “pishraft-e 70 darsadi-e tarh-e morvarid-e khalij-e fars,” Fars News Agency, March 31, 2014, accessed: May 12, 2014, http://www.farsnews.com/printable.php?nn=13930111000061.

[12] “Vijegi-haye Nasl-e Jadid-e Gharardad-haye Nafti-e Iran,” Pars News, January 24, 2014, accessed February 28, 2014, http://www.parsnews.com/بخش-سیاسی-3/112472-ویژگ%25….

[13] “tasvibname dar khosuse sharayet-e omoomi, sakhtar va olgooye gharardad-haye baladasti-e naft va gaz,” Islamic Parliament Research Center, November 2, 2015, http://rc.majlis.ir/fa/law/show/944062.

[14] “Padash-e Iran be ghoul-haye nafti,” Islamic Revolution Document Center, June 7, 2014, accessed: june 14, 2014, http://www.irdc.ir/fa/content/45061/default.aspx.

[15] “vagozari-e bazaryabi-e naft be peymankaran-e khareji dar nasl-e jaded-e gharardadhaye nafti,” Ayar Online, February 2, 2014, accessed: August 1, 2014, http://ayaronline.ir/1392/11/46873.html

[16] “mayadin-e moshtarak olaviyyat-e avval dar gharardad-haye jaded-e nafti,” Ilna News, February 24, 2014, accessed: July 4, 2014, http://www.ilna.ir/news/print_news.cfm?id=148281.

[17] Parisa Hafezi and Jonathan Saul, “Exclusive: Iran sweetens oil contracts to counter sanctions and price plunge,” Reuters, February 3, 2015, accessed: February 3, 2015, http://www.reuters.com/article/2015/02/03/us-iran-oil-sanctions-idUSKBN0L70FO20150203?feedType=RSS&feedName=topNews&utm_source=twitter.

[18] “tasvibnameh dar khosoos e sharayet-e omoomi, sakhtar va olgooye gharardad-haye bala dasti-e naft va gaz,” Islamic Parliament Research Center, September 30, 2015, accessed: December 1, 2015, http://rc.majlis.ir/fa/law/show/944062.

[19] This was initially done in the Ahmadinejad administration. Seyyed Payam Bathayee, “haq e tarjih-e foroush-e naft baraye peymankaran,” Fars News Agency, December 8, 2011, http://www.farsnews.com/printable.php?nn=13900717000285; “Minister: Iran’s New Oil Contracts More Attractive to Int’l Investors,” Tasnim News Agency, February 22, 2014, accessed: August 12, 2014, http://www.tasnimnews.com/English/Home/Single/291220.

[20] “7 Vijegi-ye Gharadad-haye Jadid-e Nafti,” Mehr News Agency, June 7, 2014, accessed: 8/30/14. http://www.mehrnews.com/TextVersionDetail/2305867.

[21] “mayadin-e moshtarak olaviyyat-e avval dar gharardad-haye jaded-e nafti,” Ilna News, February 24, 2014, accessed: July 4, 2014, http://www.ilna.ir/news/print_news.cfm?id=148281.

[22] “mehvar-e barnameh-haye nafti negah be daroun ast,” Shana: Iranian Oil Ministry Petro Energy Information Network, March 6, 2014, accessed: June 6, 2014, http://www.shana.ir/fa/newsagency/213440.

[23] “7 Vijegi-ye Gharadad-haye Jadid-e Nafti,” Mehr News Agency, June 7, 2014, accessed: 8/30/14. http://www.mehrnews.com/TextVersionDetail/2305867.

[24] “vazir-e naft-e Iran: hich mahdoudiyati ra baraye saderat-e naft nemipazirim,” BBC Persian, May 9, 2014, accessed: July, 28, 2014, http://www.bbc.co.uk/persian/business/2014/05/140509_zangane_oil_iran.shtml%20Page%202%20of%203.

[25] “Vijegi-haye Nasl-e Jadid-e Gharardad-haye Nafti-e Iran,” Pars News, January 24, 2014, accessed February 28, 2014, http://www.parsnews.com/بخش-سیاسی-3/112472-ویژگ%25….

[26] Ibid.

[27] “Afzayesh-e 22 darsadi-e saderat-e naft-e Iran be Japon,” March 31, 2014, accesses: April 3, 2014, http://www.farsnews.com/printable.php?nn=13930111000259.

[28] Christian Campbell, Legal Aspects of Doing Business in the Middle East 2009, (np: Yorkhill Law Publishing, 2009), 4-5; “pishbini-e saderat-e naft-e Iran be Oroopa va Amrika,” Fars News Agency, August 29, 2014, accessed: October 11, 2014, http://www.farsnews.com/newstext.php?nn=13930607000299.

[29] “7 Vijegi-ye Gharadad-haye Jadid-e Nafti,” Mehr News Agency, June 7, 2014, accessed: 8/30/14. http://www.mehrnews.com/TextVersionDetail/2305867.

[30] Ibid.

[31] Parviz Amineh, Secure Oil and Alternative Energy, (Leiden: Brill NV, 2012), 149-157; “negahi be hozoor-e sherekat-haye khareji dar san’at-e naft o gaz-e Iran,” Danakhabar, March 31, 2014, accessed: May 26, 2014, http://danakhabar.com/fa/print/1171205.

[32] “China abandons Iran-Pakistan gas pipeline, eyes TAPI,” Pakistan Today News Agency, May 1, 2014, accessed: July 30, 2014, http://www.pakistantoday.com.pk/2014/05/01/national/china-abandons-iran-pakistan-gas-pipeline-eyes-tapi/.

[33] “China to double Iranian investment,” BBC World Service News, November 16, 2014, accessed: November 17, 2014, http://www.bbc.com/news/business-30075807.

[34] “negahi be hozoor-e sherekat-haye khareji dar san’at-e naft o gaz-e Iran,” Danakhabar, March 31, 2014, accessed: May 26, 2014, http://danakhabar.com/fa/print/1171205.

[35] Ibid.

[36] Ibid.

[37] Anthony H. Cordesman, The Changing Dynamics of Energy in the Middle East, (Westport: Center for Strategic and International Studies, 2006), 244.

[38] Hossein Alikhani, Sanctioning Iran: Anatomy of a Failed Policy, (London: I.B. Tauris, 2000), 186; Steven Wright, The United States and Persian Gulf Security: The Foundations of the War on Terror, (Berkshire: Ithaca Press, 2007), 107-114; “negahi be hozoor-e sherekat-haye khareji dar san’at-e naft o gaz-e Iran,” Danakhabar, March 31, 2014, accessed: May 26, 2014, http://danakhabar.com/fa/print/1171205.

[39] Tara Patel and Francine Lacqua, “Iran to Woo Oil Companies With ‘Sexy’ Contracts, Total CEO Says,” Jan 24, 2014, Bloomberg, accessed: 2/14/2014, http://www.bloomberg.com/news/2014-01-24/iran-to-woo-oil-companies-with-sexy-contracts-total-ceo-says.html; “faranse amade hamkari-e tejari ba Iran ast,” Shana, February 14, 2014, accessed: June 20, 2014, http://www.shana.ir/fa/newsagency/212226.

[40] “sharekat-haye bozorg-e nafti-e jahan montazer-e hojoom be bazar-e Iran hastand,” Shana, February 14, 2014, accessed: October 2, 2014, http://www.shana.ir/fa/newsagency/212314.

[41] “ Europe Oil Buyers Return to Tehran to Talk Business,” Business & Financial News, Breaking US & International News | Reuters.com, January 23, 2014, accessed February 28, 2014, http://www.reuters.com/assets/print?aid=USL5N0KX3KF20140123.

[42] “negahi be hozoor-e sherekat-haye khareji dar san’at-e naft o gaz-e Iran,” Danakhabar, March 31, 2014, accessed: May 26, 2014, http://danakhabar.com/fa/print/1171205

[43] Jason Rezaian, “US investors begin to imagine return to Iran,” Washington Post, May 28, 2014, June, 28, 2014, accessed: http://www.washingtonpost.com/world/middle_east/us-investors-begin-to-imagine-a-return-to-iran/2014/05/27/c5cda6d7-0c8a-442a-8577-a0726f494199_story.html.

[44] “Full Events List,” Third GECF, 23 November 2015, Tehran, Iran, accessed: December 10, 2015, http://www.gecf.org/events/list/all?d=2015&p=1.

[45] Ron Bousso and Peg Mackey, “ Europe Oil Buyers Return to Tehran to Talk Business,” January 23, 2014, accessed: March 25, 2014, http://www.reuters.com/assets/print?aid=USL5N0KX3KF20140123.

[46] “Various Oil contracts: Buyback Plans and Finance,” Research Center of the Islamic Republic of Iran’s Parliament, No. 7049 (2004), pp. 3-4.

[47] “Joint Comprehensive Plan of Action (JCPOA),” U.S. Department of State, October 18, 2015, accessed December 11, 2015, http://www.state.gov/e/eb/tfs/spi/iran/jcpoa/.

[48] Ahmed al-Qushairi and Tariq Riadh, trans. and discussion by Mohsen Mohebbi, “The Laws that Rule the New Generations of the Oil Contracts: A Shift in the Judicial Process,” The legal Magazine, a Publication of the Islamic Republic of Iran’s Office of International Legal Services, No. 29, pp. 29-109, November 23, 2003, 29, 36, 42, and 109; “Hoqooq-e naft o gaz dar davari-e beynolmelali,” Vista News Hub, August 31, 2014, accessed: September 9, 2014, http://vista.ir/article/310635/.

[49] Sayyed Morteza Motahhari, “Anfal Chist,” The Official Site of Morteza Motahhari, vol. 26, pp. 259-266, June 10, 2012, accessed November 3, 2014, http://www.mortezamotahari.com/fa/bookview.html?BookId=440&BookArticleID=131258;

Makarem Shirazi, Tafsir-e Nemooneh, “Anfal,” vol. 2, Part 7, accessed: November 3, 2014, http://www.aviny.com/quran/nemoneh/vol2/nemn2_07.aspx?&mode=print;

Seyyed Ali Hoseini, “Bazshenasi e Mafhoom-e Anfal va Rabete An ba Marate’ dar Feqh va Hoghoogh,” Hawza Magazine, October 7, 2002, accessed October 30, 2014, http://www.hawzah.net/fa/magazine/magart/4385/4388/29132.

[50] “Ghanoon e Asasi,” Islamic Republic of Iran’s Supreme Audit Court, last updated 2010-2011, accessed November 3, 2014, http://www.dmk.ir/ShowPage.aspx?page_=form&order=show&lang=1&sub=0&PageId=223&codeV=1&tempname=main; Hasan Sobhani, “Vazayef-e Hokoomat Darbare Anfal,” Fars News Agency, December 3, 2013, accessed November 3, 2014, http://www.farsnews.com/newstext.php?nn=13920912000797.

[51] Ibid.

[52] Samih K. Farsoun and Mehrdad Mashayekhi, Iran: The Political Culture in the Islamic Republic, (London: Routledge, 2005), 125.

[53] Ervand Abrahamian, The Coup: 1953, the CIA, and the Roots of Modern U.S. Iranian Relations, (New York: The New Press, 2013), 220; Ibrahim M. Abu-Rabi’, The Blackwell Companion to Contemporary Islamic Thoughts, (Oxford: Blackwell Publishing Ltd., 2006), 555; Zhand Shakibi, Khatami and Gorbachev: Politics of Change in the Islamic Republic of Iran, (London: I.B. Tauris, 2010), 96; Ramin Jahanbegloo, Civil Society and Democracy in Iran, (Lanham: Lexington, 2012), 46; Minoo Moallem, Between Warrior Brother and Veiled Sister: Islamic Fundamentalism, (Berkeley: University of California Press, 2005), 130; Tareq Y. Ismael, Glenn E. Perry et al, The International Relations of the Contemporary Middle East, ( Abingdon: Routledge, 2014), 144; Abbas Milani, The Myth of the Great Satan: A New Look at America’s Relations with Iran, (Stanford: Hoover Institution Press Publication, 2010), 46; Michael Axworthy, Revolutionary Iran: A History of the Islamic Republic, (Oxford: Oxford University Press, 2013)150, 426.

[54] Ibid, 120, 136, 154, 165, 187, 202.

[55] “Reqabat-e jaded-e Iran-Amrica dar bazar e benzin,” Entekhab Newspaper, May 20, 2014, accessed: July 3, 2014, http://www.entekhab.ir/fa/print/162371.

[56] “asangiri dar gharardad-haye nafti be omid-e raf’-e tahrim,” BBC Persian News, February 23, 2014, accessed: June 12, 2014, http://www.bbc.co.uk/persian/business/2014/02/140223_oil_newcontracts_iran.shtml?print=1; OGJ. Editors, “Quick hike seen in Iranian oil output if sanctions lifted,” Oil and Gas Journal, January 29, 2014, accessed: February 17, 2014, http://www.ogj.com/articles/2014/01/quick-hike-seen-in-iranian-oil-output-if-sanctions-lifted.html; “Tolid-e naft-e Iran ba laqv-e tahrim-ha shetab migirad,” Shana, February 14, 2014, accessed: May 26, 2014, http://www.shana.ir/fa/newsagency/212057.

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