Energy

Iran Rolls Out Welcome Mat For US Energy Companies

REUTERS/Caren Firouz

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Andrew Follett Energy and Science Reporter
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Iran’s oil minister invited American energy companies to invest in his country as economic sanctions against the Islamic republic are rolled back.

“In general, we have no problem with the presence of American companies in Iran,” Iranian Oil Minister Bijan Zangeneh said to Iran’s Press TV Monday. “But it is the American government that is creating restrictions for these companies.”

Iran has constitutional restrictions that make it hard for foreign energy companies to do business in the country. A lack of transparency and a long history of using individuals as pawns in internal political disputes also make Western companies wary of investing in Iran.

“The notion that the obstacles are all on the American side just isn’t true,” John Gay, an editorial staffer at The National Interest who covers Iran, told The Daily Caller News Foundation. “It would be easier to believe this if the Iranians weren’t holding the American oil executive Siamak Namazi and his father. They are subject to highly politicized courts, without access to his lawyer on false charges. This is a transparent attempt to put pressure on him. Does that sound like an attractive investment climate?”

Even though the oil minister appears open to investment, Iranian Supreme Leader Ali Khamenei publicly stated in December that no U.S. company would be allowed to invest in the country, and suggested that foreign investment is a Western tactic that could bring down Iran’s theocratic system of government. The country’s government is deeply divided over the question of foreign investment.

Iran is desperate for investment in its energy industry despite its domestic political disputes. Iran hasn’t seriously invested in its oil or energy sectors for years due to sanctions and lack of cash, but its energy consumption is estimated to be 80 percent above the Middle East’s average. Iran is one of the most energy-intensive countries in the world, with per capita energy consumption 15 times that of Japan and 10 times that of European Union. The country is also one of the most energy inefficient countries in the world.

Iran’s economy is deeply dependent on cheap energy, and keeps energy prices artificially low through enormous subsidies. Iran spends between $40 to $100 billion annually on these subsidies, according to The Economist, while Iran’s entire gross domestic product (GDP) in 2014 was just $406.3 billion. The huge subsidies and low oil prices mean finding enough cash to invest in Iranian companies would be nearly impossible, so the country is turning to foreign creditors.

Simply keeping the lights on is estimated to require a minimum $150 billion of new investment — that number could be as high as $500 billion over the next five years, according to reports by Iran’s state-run news agency. The country is even trying to attract investment from German solar companies.

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