Iranian Parliamentarian Blasts Buy-Back Deals
The chairman of the Iranian parliamentary energy committee, Mostafa Taheri, blasted oil ministry buy-back deals for being expensive and inefficient, according to the Entekhab newspaper on December 21st.
Taheri recommended that the government apply to foreign financial institutions for funding instead, which he said would be cheaper and more efficient.
Tehran began using buy-back deals in the mid-1980s to bypass constitutional bans on foreign ventures in an effort to lure much-needed foreign capital to the country’s ageing energy sector.
The industry had been in desperate need of rehabilitation as a result of the 1980-1988 Iran-Iraq War and U.S. sanctions.
Buy-back schemes allow an investing company to regain its capital and to make a profit through receiving a portion of the project’s production.
Iran has defended the use of buy-backs, using them to open up the country’s energy sector in an effort to meet its OPEC quota.
Critics have argued, though, that the method does not bring new technologies or new job opportunities into the country and that investors assume no price risk and are repaid under the agreed formula, no matter how much of a project’s output must be used to do so.
Others have feared that foreign companies could delay projects to reap greater profits.
Iran has already conducted some $10 billion in buy-back deals and is in negotiations on another $10 billion worth.
Taheri indicated that parliament does not intend to investigate the deals at present, but did not rule out such an effort in the future.