A Candid Discussion with Reza Taghizadeh

Reza Taghizadeh on Iran’s Energy Policy in Disarray 

Reza Taghizadeh is a senior Iran analyst at Radio Free Europe/Radio Liberty, covering Iranian geopolitical affairs and energy policy. Dr. Taghizadeh’s expertise is sought by major news organizations and foreign governments on Iran’s foreign and energy policies. He sat down with Reza Akhlaghi of Foreign Policy Association to discuss Iran’s June 14 presidential elections and the country’s energy policy.

_________________________________________________________________

What is your take on Iran’s overall energy policy over the past eight years of the Ahmadinejad administration? Does the Islamic Republic have a strategic roadmap when it comes to energy policy? What are its key components?

Although heavily dependent on oil exports for the day-to-day running of the state’s economy, from the start of the new government in 2005, the Islamic Republic priorities shifted to a nuclear development program and therefore oil and gas sector lost their strategic importance in the ruling  body’s  calculus,

Assuming that the world economy cannot afford the consequences of Iran oil exports being cut off by the hostile West, the green light was then given to a full speed drive towards completion of nuclear fuel cycle, even at the cost of a possible referral to the U.N. Security Council that might have been made.  A volatile oil market and the increasing crude prices in the last seven years offered the government of Iran not only the reassurance s to believe that  its  calculations were right, but also gave it further financial leverage to advance its nuclear objectives even faster than it had anticipated.

The government of Iran, being deeply involved in political squabbles at home and abroad, neither had the time nor the desire to devise a roadmap that could keep the country’s oil and gas sector out of trouble while the threat of the U.N. and unilateral U.S.-EU sanctions were looming.

With Russia’s energy and geopolitical interests in Afghanistan on one hand, and Iranian-Pakistani ideological and energy interests on the other, to what extent do you see this interweb of interests contribute to the failure of NATO’s project in Afghanistan?

NATO believes that it has fulfilled its purposes in Afghanistan, despite a host of security complications that had hindered efforts of the allied forces there from time to time. The Russian interests in Afghanistan have changed, comparing to the time the Soviet Union military forces were stationed in Kabul during the ‘70s.

The Russian interests in Afghanistan, besides the minor security considerations of Moscow with regards to the threat of radical Islam that could destabilize security of the Central Asian states, are currently affected and mainly driven by gas and oil markets of the region. In that sense, Russia and Iran are having conflicts of interest rather than common causes for closer cooperation in Afghanistan.  Russia’s best interest would be served if they could divert Iran’s potential gas export capacities to Pakistan (and India), in an effort to deny Europe a chance to develop an East-West energy corridor and undermine dominance of Moscow there.

Considering the line of Sunni-Shi’a divide, such postulated, based on Iranian-Pakistani common ideological interests, is facing lack of credential, despite their efforts to work out a plan for energy cooperation. Iran needs Pakistan to achieve some sort of power balance on its eastern borders, and for the time being, the out-going government of Ahmadinejad appeared to be happy to pay for it by the way of meeting in part Pakistan’s thirst for energy supply. Iran’s natural energy market is located in Europe and the East-West corridor is destined to be developed sooner or later.

If the new and surprising makeup in the presidential candidacy is the result of an inter-factional accord within the power structure, do you believe this is a harbinger of a resolve by the power elite to drag the country’s dilapidating energy sector out of its current state of disorder?

There is no doubt in my mind that disqualification of Rafsanjani was the byproduct of inter-factional power struggle within the ruling elite, nor do I have any doubt that salvaging Iran’s dwindling oil export and gas production was not the target of the new makeup in the presidential candidacy, but the victim of a plot that was devised to shore up the Supreme Leader’s power base. Perhaps there would have been a chance to initiate a different approach to finding a solution for the badly damaged energy sector in Iran, but with one of the three cronies of the leader tipped to be introduced as the next head of Iranian government, this hope seems all but totally dashed now.

What are the roles of factional rivalries and corruption in the distribution of oil revenue to various government institutions and the trickling of this revenue down to Iranian consumers?

From 2005 to 2012, a period in which global sanctions cut Iran’s oil exports by almost 40%, Iran’s foreign revenues were in excess of 800 billion U.S. dollars. Almost half of the total oil export income were exchanged in the money market to the local currency and paid as bank loans for the murky business, or the government’s bureaucratic bodies.  The fall of national currency’s exchange value together with the steady rise of annual inflation shows that Iran’s natural resource were  wasted by the current government for eight years under the banner of ”national wealth re-distribution”; and the next government would be  formed by the elements that would only continue to serve Iran’s deeply corrupt ruling elite.

What strategic imperatives should a new presidency pay particular attention to regarding regional/global energy issues that can impact Iran’s geo-energy interests? 

Iran’s oil and gas sector should be given precedence over the nuclear development program with immediate effect. If it happens, then Iran’s new strategic imperatives would dictate new terms in the conduct of the state’s foreign relations. The cost of the existing preferences and approach towards nuclear development program is about 600 million dollars a month, if the reduced oil income, gas production capacity stopped and the increased costs of foreign raid combined. Iran cannot afford to continue with this economic hemorrhaging. Iran is virtually on the verge of exploding. If the ruling elite failed today to find a way out of this mess, tomorrow might be too late for them to do so.