Ahmadinejad Appoints an Acting Oil Minister

Backs Down In Face of Strong Opposition to Assume Control of Oil Ministry

Iran’s President Mahmoud Ahmadinejad today appointed Mohammad Aliabadi as the Acting Oil Minister, ending a constitutional crisis over the issue of whether a sitting president could assume the responsibilities of one of his cabinet departments. Ahmadinejad had insisted that he could appoint himself as the acting oil minister. The Guardian Council, the country’s constitutional watchdog, had ruled that the president’s move was unconstitutional.

Yesterday, Majlis, the Iranian parliament, passed a resolution by an overwhelming majority calling Ahmadinejad’s action “illegal” and referred him to Judiciary, a major step in preparation of an impeachment process against a president. Today, Ahmadinejad backed down and appointed an acting minister.

Mohammad Aliabadi, the new acting oil minister, is the former director of Iran's National Sports Organization and the president of the country’s National Olympic Committee. Aliabadi’s 15-minute claim to fame came when he filed a formal protest against London’s 2012 Olympic Logo, saying the logo was reminiscent of the word ‘Zion’ and therefore racist.

Meanwhile, IRGC Brig. Gen. Rostam Ghasemi, the commander of Khatamolanbia Base, the industrial arm of the revolutionary guards, told IRNA minutes after the appointment of the acting oil minister that he was asked to accept the post and he was still considering the offer.

The acting oil minister will preside over the 8 June OPEC meeting in Vienna as Iran holds the rotating presidency of the organization. Ahmadinejad’s conservative critics wanted at all costs to prevent him using the prestigious platform as the spokesman for all oil producing nations to his political advantage. They produced a ruling by the Guardian Council and a resolution by Majlis to force him give up the position.

Oil Saga Continues

Former oil minister Kazem Vaziri Hamaneh, who was sacked by Ahmadinejad last week, warned of a looming “catastrophe” in Iran’s energy sector (ISNA). Although Iran is OPEC’s second largest oil producer, its gasoline consumption forces it to import million gallons of gasoline every day despite the recent gasoline rationing. Vaziri Hamaneh said consumption cannot be controlled with current low prices.

The acting oil minister, Gholam Hossein Nozari, is arguing that the solution to the oil crisis in Iran is an increase in crude oil production. The foreign investment needed to boost the production has, however, all but evaporated.

Ahmadinejad has claimed that during his two years in office, Iran has been able to secure $38 billion in foreign investment for the oil sector. The claim has been denied by Iran oil experts. Almost all of the commitment has been memoranda of understanding, with no sign that any investment is actually taking place. A number of European companies have been hesitant to go ahead with any involvement in Iran’s energy projects. The latest companies suspending involvement in Iranian projects are Royal Dutch Shell, Respol of Spain and OMV of Austria.

Iran Oil Executive Confirms Drop in Production

The managing director of Pars Oil and Gas Corp. and the former oil minister Akbar Torkan said, “At the moment, on average, we produce four million bpd of crude. But without new investment, five percent of this production capacity will be gone every year,” ISNA reported (8 July).

In the 1 July posting in this blog, “The Coming Oil Crisis”, we calculated the diminishing rate of production to be at 8% a year. The decrease plus the annual 2% increase in domestic demand for oil would lower Iran’s oil exports by 10% annually. Out of 4 million bpd of oil production, some 2.4 million bpd is currently exported. At this rate, Iran will run out of oil export by 2014.