Gov't Prefers Private Firms in Oil Swap Deals

Gov't Prefers Private Firms in Oil Swap DealsGov't Prefers Private Firms in Oil Swap Deals

Government officials have pushed for private sector's involvement in oil exports.

The issue was discussed during a meeting at Tehran Chamber of Commerce, Industries, Mines and Agriculture attended by First Vice President Es'haq Jahangiri and Minister of Industries, Mining and Trade Mohamed Reza Nematzadeh.

Deputy oil minister for planning and supervision, Mansour Moazzami, said at the meeting oil export can be handed over to the private sector, calling for the full transfer of oil swap operations from state companies to private firms, ISNA reported.

“There are currently problems with regard to export of oil products, but the private sector can find the key to tackle those problems," Moazzami said. "Iran lost a profitable market with the halt of swap operations."

The private sector carried out much of the swap operations in the oil and gas sector and stabilization of petrochemical prices by the government can facilitate swap operations for the private sector. "The price of oil products and energy carriers must be precisely determined for the next 10 years so that private entities can make headway with effective future planning and certainty," Moazzami said.

Masoud Khansari, the head of the chamber, said state-owned companies have become "absolute rulers" of Iran's economy.

“The government has never considered the private sector as its competitor," Nematzadeh said. "We will certainly stand by the private sector and support their activities."

The minister stressed that it is the administration's duty to empower the private sector.

  Fly in the Ointment

The private sector's willingness to take part in oil export had resulted in the enactment of a regulation authorizing the government to hand over, on credit, oil consignments of up to $100 million to the private sector.

Notwithstanding the authorization, Oil Minister Bijan Namdar Zanganeh said the private sector is required to pay cash in advance or provide a bank guarantee should they intend to export oil products.

This is while foreigners are allowed to buy crude on credit or installments, and banks are reluctant to issue guarantees when it comes to the sale of oil and condensates as the amounts are high.

Moreover, private entities are not permitted to sell the products to Iran's traditional customers, according to the Oil Ministry's bylaws, which leave no option but to find other alternatives to sell the oil in the face of sanctions prohibiting oil export.

"The ardent efforts made by the Petrochemical, Gas and Oil Exporters’ Union to take part in oil exports have been ineffective so far," Mohammad Ehsani, a member of the union, said. "But we are optimistic that the government will make necessary arrangements to get the private sector involved on a par with other [foreign] customers."

Ehsani added that by law, the private sector is authorized to handle 25% of oil exports with no limitation, but the Oil Ministry did not collaborate and levied conditions that served as serious obstacles to the private sector's involvement. Pointing to difficulties in offering cash payment and bank guarantees, head of the union, Hassan Khosrojerdi, said the government "does not believe in private sector handling oil exports."

"Because of previous malpractices, the Oil Ministry is not confident about supplying oil products to the private sector on credit," Khosrojerdi concluded.