The reasons behind Iran’s damaged oil infrastructure

Iran’s economy was built on a monopoly, hostage-taking and the policy of selling natural resources without sustainable development.
Tuesday 27/11/2018
A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Gulf, last July. (Reuters)
A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Gulf, last July. (Reuters)

Ever since the inception of the Islamic Republic of Iran, those in power have not thought of economics as a science. This mentality continues to this day.

As a result, the Iranian economy is built on a monopoly, hostage-taking and the policy of selling natural resources without sustainable development. The Iranian oil industry is a case in point. 

The Islamic Republic has been able to extract oil due to infrastructure that was established years before the Islamic Revolution of 1979. Four decades later, the oil industry remains a pillar of the country's economy, but Iran has not made sufficient investment in this field. 

After signing off on the Joint Comprehensive Plan of Action (JCPOA), Iran succeeded, after serious negotiations with OPEC, in increasing its oil production to four million barrels a day.

Iranian newspapers referred to the OPEC agreement as a diplomatic achievement that weakened the kingdom of Saudi Arabia on the global oil market.

However, due to the state of its infrastructure, Iran’s oil industry did not have the capacity to produce four million barrels of oil per day. When Bijan Namdar Zangeneh, the Iranian minister of petroleum, called on South Pars, Iran's largest field by production volume, to increase production, experts said the pressure on oil reservoirs and wells would grow and that a significant number of the country’s wells would be lost forever. 

According to Bas News, Hashd al-Shaabi, the Iraqi Shia militia under Iranian control, trafficked more than 40,000 barrels of Iraqi oil into Iran per day in order to compensate for their lack of production.

In 2017, Zangeneh announced that the maintenance (overhaul) of the refineries would change from every four years to every five years, even though the international standard of maintenance of refineries is every three years. Not only has this caused a downfall in production, but it has proven costly in the field of human resources.

According to Fars News, since Iranian President Hassan Rohani took office, ten separate incidents have occurred at Iranian refineries.

One of the most notable was an explosion in the Shazand refinery in Arak, which resulted in seven deaths and four injuries. 

The Islamic Republic recently announced that it will sell crude oil to private companies through the domestic stock exchange to counter US oil sanctions. Similar meaasures were taken during the administration of former President Mahmoud Ahmadinejad involving businessmen like Babak Zanjani, who was accused of embezzling $ 2.8 billion in oil sales. Pedram Soltani, vice president of the Iranian Chamber of Commerce, spoke out publicly against Zanjani. 

Beyond Iran’s oil infrastructure, the same scenario applies to many other Iranian industries, including steel, sugar cane, mines, manufacturing companies, etc.

Jalal Mahmoudzadeh, a speaker in parliament, warned even before US withdrawal from the nuclear deal that more than 60% of the country's industry could shut down, sharply increasing unemployment. 

"There are now six million unemployed young people in the country, and the government's statistics on unemployment are not correct, as they consider employed everyone who is working even for one hour per week," Mahmoudzadeh told the Fars News Agency earlier this year.

All of this indicates that even if the Islamic Republic is given enough time to rebuild its economy, it will continue to pursue its own ideological policies, which go against the interests of the people of Iran. 

Former US President Barack Obama’s cash payments and the unfreezing of Iran’s assets were utilised by the Iranian government to further increase its support of Syrian dictator Bashar Assad and his militias in the region. Financial assistance provided by Europe, in the name of the protection of Afghan refugees in Iran or environmental protection programmes, were in fact topical medication that kept the corpse of Iran’s sick economy temporarily numb.

Towards the Islamic world, Iran postures as the symbol of the innocence of Ahl al-Bayt (the family of the Prophet Mohammed) and protector of the oppressed; and towards the European and American left who, in most cases, lack sufficient understanding of the economic situation and the livelihood of Iranians, as a victim of capitalist and imperialist plots.

Meanwhile, an economic mafia affiliated with the government is hoarding drugs and food, while attributing the situation to sanctions that are only to be implemented fully in the coming week. However, the Iranian government has neither the will nor the ability to control the status quo.

The counterpoint to the Iranian government is the people of Iran, whose number of peaceful protests and continuous strikes is unprecedented in the Middle East. Most of the left-led press in Europe and the Democratic party in the United States continually support the Islamic Republic, referring to the effects of sanctions on ordinary Iranians, while systematically ignoring the same ordinary Iranians who suffer from widespread human rights violations and repeatedly organise strikes in factories, schools and on the streets.

One of the important effects of sanctions on the international level has been targeting Iranian officials, who, through massive embezzlement and corruption, have benefited from the global market. On the domestic level, the results are manifest in the speed with which the names and faces of those economic corruptors, all of whom are high ranking officials, are disclosed to Iranian people.