August 12, 2007 / 7:25 PM / in 10 years

Iran oil minister replaced, caretaker picked

TEHRAN (Reuters) - Iranian President Mahmoud Ahmadinejad replaced his oil minister, Kazem Vaziri-Hamaneh, on Sunday, a move some analysts saw as a bid to stamp his control on an industry that is the source for most of Iran’s revenues.

<p>Facilities at phases 2-3 of the South Pars gas field, owned jointly by Iran and Qatar, are illuminated at night in Assaluyeh on Iran's Persian Gulf coast, May 27, 2006. Iranian President Mahmoud Ahmadinejad replaced his oil minister, Kazem Vaziri-Hamaneh, on Sunday, a move some analysts saw as a bid to stamp his control on an industry that is the source for most of Iran's revenues. REUTERS/Morteza Nikoubazl</p>

Iranian news agencies, which carried letters from the president announcing the step, did not give a reason but said the head of the state-owned National Iranian Oil Company (NIOC), Gholamhossein Nozari, would become caretaker minister.

One oil official, yet to officially hear the news, said such an initiative was unlikely to mark a shift in Iran’s policy on OPEC issues but could herald a shake-up by the president in the management of the state sector that Vaziri-Hamaneh had opposed.

“I am thanking you for your work during your ministerial tenure,” ISNA news agency cited a letter to Vaziri-Hamaneh saying.

It said Vaziri-Hamaneh would become a presidential adviser on energy affairs in the world’s fourth biggest oil producer which earned more than $50 billion from its crude exports in the year to March, reaping windfall gains from soaring prices.

The ministry had recently been accused by a former deputy minister of reaching a deal to sell gas to India and Pakistan, via pipeline, too cheaply.

An oil official, speaking to Reuters on condition of anonymity, said that criticism could partly be behind the move to replace the minister in the No. 2 producer in the Organisation of the Petroleum Exporting Countries (OPEC).

“But it is not the main issue,” he said. “Everyone knew that Vaziri-Hamaneh was not a candidate that Ahmadinejad wanted.”

Parliament rejected three of Ahmadinejad’s candidates for the post of oil minister after he came to office in 2005. MPs complained those candidates lacked experience in the industry, before Vaziri-Hamaneh, a technocrat, was accepted.

Analysts say Iran’s oil industry needs a big injection of foreign investment with accompanying expertise to meet targets to boost output beyond roughly 4 million barrel per day now.

The ministry also faces the challenge of implementing a gasoline rationing scheme that prompted protests in June.

‘OIL MAFIA’

“The question is can a new minister have sufficient backing to press forward much needed reform in the oil and gas sector?” said Iranian Energy Analyst Mehdi Varzi.

Analysts said Nozari came with expertise and inside knowledge to help ensure a smooth transition in the ministry.

“Nozari could be better for the oil industry, as he is more action-orientated. But he’s still a prisoner of the bureaucracy though,” said an executive at an international oil company.

Rumors swirled in the media this year that Vaziri-Hamaneh would be replaced although those reports were regularly denied.

Speculation had focused on Vaziri-Hamaneh’s opposition to the president’s plans for a management sweep-out in the oil industry, similar to Ahmadinejad’s changes in other official bodies since taking power on a pledge to root out corruption.

During his election campaign, Ahmadinejad promised to tackle the “oil mafia” in the state-dominated Iranian energy sector.

The oil official said policy towards OPEC was not likely to change. Vaziri-Hamaneh, like other OPEC ministers, has insisted high oil prices are not due to a shortage in crude supply. OPEC ministers next meet on September 11.

“The thing that could change if Mr Nozari took command is that many officials who previously Mr. Vaziri-Hamaneh resisted changing would change,” the official said.

Analysts said this could lead to a greater bias towards offering new energy development contracts to Iranian firms, already playing a bigger role, instead of foreigners.

Foreign firms are wary of investing in Iran amid threats of a third round of U.N. sanctions over its nuclear program, which the West says is a bid to build bombs. Tehran denies this.

An Iranian political analyst said changing the minister appeared to be part of a bigger plan by the president to assert his control on the crucial sector. “(Ahmadinejad) is trying to exert more influence,” he said.

Additional reporting by Parisa Hafezi and Fredrik Dahl in Tehran and Simon Webb in Dubai

Our Standards:The Thomson Reuters Trust Principles.
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