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The role of political structure in Iran's energy decision making policy.


Oil revenue constitutes over 80 per cent of Iran's total export earnings and 42.5 per cent of gross domestic product. (1) The importance of oil has placed energy policy on the top of the government agenda. At the same time this huge oil revenue made the control on oil industry at the center of power struggle and competition among various political groups. These groups have tried to develop and increase their influence in oil sector with legally or illegally methods and ways.

While economic factors could justify Iran's energy policy decision-making process, they failed to explain many political factors affecting Iran's energy policy. The role of political factors in shaping Iran's energy policy can be explained by the power structure in Iran, the role of all-powerful supreme leader, the position of the president as well as the interests of ruling groups. The present study is an attempt to analyze these political factors which lead Iran's energy policy.


Energy and its decision making process in Iran have been reviewed by different scholars who have written about states behaviors in the world politics. According to their researches, energy policy decision-making can be influenced by domestic factors. According to this approach each state behaves differently as a result of its domestic political structure. For instance, while domestic political oppositions are strong in one state, leader's orientations are strong factor in the other, and interest groups are powerful in third state, and so forth.

James N. Rosenau in his work "Pre-Theories and Theories and Foreign Policy" (1966)as one of the followers of domestic explanations, argues that there are different levels of causation that shape states behaviors such as individual's role or government structure. Although, he recognizes that there are numerous domestic factors that can and do influence states behavior, these influences are necessarily channeled through the political apparatus of a government that identifies, decides, and implements policy. (2)

Policy is made by people configured in various ways depending on the nature of the problem and the structure of the government. For instance about foreign policy decision making process, Margaret G. Hermann in her book "How Decision Units Shape Foreign Policy: A Theoretical Framework" (2001) argues that two questions must be addressed if we are going to get inside the"black box" of government to understand the relevance of leadership to the policymaking: (1) What types of actors make policy decisions? (2) What is the effect of these decision units on the resulting foreign policy? Hermann has replied these questions according to the decision unit dynamics framework.

Based on the unit dynamics framework, there are three different models suggestions related to the process of government making decision foreign policy. They contain: predominant leaders, single group, and coalition. The predominant leader's model type is that "...the regime has one individual in its leadership who is vested with authority." (3) Single group assumes that" ... if the government is not structured around a single individual, there may be a designated group that is responsible for dealing with the occasion under consideration." (4) And, the coalition model means that "... the unit is composed of multiple autonomous actors. That is, two or more entities [individual leaders, groups of policymakers, bureaucratic agencies, and interest groups] have the power to commit or withhold the resources of government." (5)

According to this definition, coalition model exists in Iran where there are autonomous actors who can direct Iran's domestic and internal policies and energy policy as well. These actors include: Ministry of Oil, Supreme Leader, President, Interest Groups and Institutions, the Expediency Council, Parliament, and the Guardian Council.


National Iranian Oil Company (NIOC) is the fourth largest state oil firm in the world. NIOC's oil and gas in place reserves are 132 billion barrels and 970.8 trillion cubic feet respectively which give the NIOC a unique status on the global energy supply map. (6)

The NIOC is exclusively responsible for the exploration, extraction, and transportation of crude oil, as well as the sales of natural gas and liquefied natural gas (LNG). Having provided the domestic refineries and manufacturing plants with crude oil required for the petroleum products, the NIOC exports its surplus production according to commercial considerations in the framework of the quotas determined by the Organization of Petroleum Exporting Countries (OPEC) and at the prices prevalent in the international markets. The NIOC also signs some long term contracts with foreign companies in order to exploit national oil fields and export its products. In addition, the NIOC exports natural gas and liquefied natural gas via the "National Iranian Gas Export Company" which is one of its subsidiaries. (7)

The NIOC has found this power eventually since its establishment in 1948. From the beginning nominally, NIOC was a public company and not a state-owned corporation or state company, although all its shares were government owned. In 1970s, "... oil was providing 90% of Iran's foreign-exchange earnings in the last years of the Mohammad Reza Shah's rule." (8) This made NIOC important, and as a result NIOC was able to develop and function as a modern integrated oil company.

However, after the Islamic Revolution in Iran, NIOC was placed under the direct control of a newly created Ministry of oil in September 1979. Though, according to the constitution, the Oil Ministry is symbiotic with N IOC and it does not have any control over it, the law has not clarified the institutional distinction between NIOC and Ministry. (9) As it can be seen, NIOC under this supervision is still responsible for oil and natural gas production, exploration and marketing of crude oil and natural gas.

However, for fifteen years after the establishment of Oil Ministry the NIOC was left without even a managing director. As a result, all the prerogative and authority were gradually taken away from the NIOC and given to the Ministry of oil. (10) in addition, the Ministry's role as a policy maker has been mixed with the operational side of the NIOC, National Iranian Gas Company (NIGC) and other state hydrocarbon companies.

Since 1990, there have been minor improvements, as a result of economy and political reforms, such as the appointment of an NIOC managing director, occasionally from outside the oil and gas industries. However, N1OC, NIGC and National Petrochemical Company (NPC) management effectively are under oil Minster direct control and this politicizes them to the extent that could hamper their commercial development. (11)

The politicization of the NIOC which has affected the Iran's energy policy is the result of the constitution and the centers of power that have played role and interfered in the oil decision making.


The role of supreme leader in the Iranian constitution is based on the ideas of Ayatollah Rohullah Khomeini, who positioned the leader at the top of Iran's political power structure. The supreme leader, elected by the Assembly of Experts, may be dismissed at any time by that body. (12) Apart from this, he has broad and nearly unlimited powers. According to the constitution, the supreme leader directly appoints the head of the Judiciary, Military officers, the Expediency Council, a majority of the Guardian Council members, Friday prayer leaders and the head of radio and TV. He also confirms the president's election and the heads of dozens of political, economic, and cultural institutions. (13)

For thirty years, Iran had two supreme leaders; Ayatollah Rouhollah Khomeini and Syyed All Khamenei, who played significant role in Iran's energy policy. Although in the constitution the role of the supreme leader in oil decision making policy is not mentioned, there are different ways through which the Iranian supreme leaders utilize the current situation of the country besides the lack of power in the other political official centers and their authorities to affect Iran's energy policy.

1. Political Policy: The first and the most important impact of the supreme leader role in Iran's energy policy was under Ayatollah Khomeini's leadership. Under Ayatollah Khomeini's leadership, "... the 1979 constitution of the Islamic Republic officially enshrined the concept of public ownership and state administration of oil under state control, specifying that mineral wealth be at the disposal of the Islamic government for it to utilize in accordance with the public interest." (14)

Based on the new constitution, in 1980 all NlOC's joint venture and service contract agreements with foreign oil companies were terminated. The joint venture companies were wound up and regrouped under the Iranian Offshore Oil Company of the Islamic Republic. The Islamic regime even changed the names of oil fields with imperial connotations. For instance, Cyrus became Sorush, and Feridun became Foroozan. (15)

Meanwhile, the revolutionary government under Ayatollah Khomeini policy was committed to reduce Iran's dependence on the oil revenue, thus, oil production was limited to less than three million barrels per day. The result was reducing oil production from 6 million barrels per day to 1,662 million barrels per day from 1978 to 1981. (16) In addition, the disastrous war with Iraq combined with the deterioration in the world market for crude after 1981 and OPEC export quotas left NIOC in no position to expand production even if it had so wanted. (17)

2. Economic Power: One way for the supreme leader to expand his political authority is to extend his economic reach. Many economic institutions function under the authority of the supreme leader, but officially are considered governmental organizations. This is particularly through the foundations (Bonyad), such as, the Foundation of the Oppressed and War Veterans(Bonyad-e Mostazafan), Martyr Foundation (Bonyad-e Shahid), the Holy Shrine of Imam Reza (Astan-e GhodseRazavi), the Khatamol Anbia Company, and the Fifteenth of Khordad Foundation (Panzdah-e Khordad), which legally are tax-exempt nonprofit organizations that are free of the parliament or presidential control. These foundations have been established by Ayatollah Khomeini. (18)

Meanwhile, the role of the supreme leader during Ayatollah Khameni through these foundations in NIOC and oil decision making policy with different justifications has increased. For instance, in April 2006, the supreme leader formally announced his approval of a plan for the implementation of the revisions to Article 44 requiring privatization of considerable state assets (although still ruling out privatization of NIOC). (19) Under the privatization plan, 47 oil and gas companies (including Petro Iran and Noah Drilling Company) worth an estimated $90 billion are to be privatized on the Tehran Stock Exchange by 2014. (20)

Following supreme leader announcement, Iran's Oil Ministry has signed an agreement with the Bonyad-e Mostazafan for selling oil in 2009. Although this agreement has been signed in terms of privatization of oil sector, participation of Bonyad-e Mostazafan as non-private sector in NIOC is not considered as a step towards privatization of oil industry. In fact it can be only recognition of interference of Bonyad-e Mostazafan as a foundation that is under of leadership. It is clear that its duties will conflict with NIOC in longterm.

The leader also has tight control over the Islamic Revolutionary Guard Corps, which has come to have a tremendous economic role. The Revolutionary Guards have exploited their favored political position to win business. (21) Based on their aims, under Ayatollah Khamenei leadership, on June 7, 2006, the Ministry of Oil awarded a $1.3 billion no-bid contract to the Revolutionary Guards to build a pipeline to transport gas across Iran. (22) This contract infuriated private construction companies. It would provide the Revolutionary Guards with an opening to enter the oil and gas sector, a move that would increase their stake in the Iranian economy's issues.

As it has been mentioned earlier, the lack of power of some elected officials such as the president resulted in the increment of the supreme leader role along with the foundations under his control in Oil Ministry.


The President is the highest elected official in the Islamic Republic of Iran and is the second highest-ranking figure in the country. According to the constitution, president is responsible for the "functions of the executive", such as signing treaties, agreements etc. with other countries and international organizations, the national planning and budget and state employment affairs, appointing ministers, governors, and ambassadors subject to the approval of the parliament. (23)

The president has the control over foreign policy, the armed forces, nuclear policy, or the main economic policy of the Iranian state, but all is under the control of the supreme leader. In fact,"... in practice, presidential powers are circumscribed by the clerics and conservatives in Iran's power structure, and by the authority of the supreme leader. It is the supreme leader, not the president, who controls the armed forces and makes decisions on security, defense and major foreign policy issues." (24)

According to constitution, the supreme leader is on the top of decision makers. But sometimes the power of president can affect decision of the supreme leader. For instance, Ayatollah Khomeini had the final say on state affairs, but during Ayatollah Khamenei leadership which coincided with the Akbar Rafsanjani presidency, the center of power shifted to the president due to Rafsanjani's position. (25)

Rafsanjani, due to the deficit of the government and based on the liberalization policy which he was following, tried to change the petroleum law for establishment of the relations with foreign states and oil companies. As a result, in 1987 petroleum law permitted contracts between the Ministry of oil, state companies and "local and foreign individuals and legal entities". (26)

The new petroleum law allowed for contracts with foreign companies under a buyback system, meaning the foreign company provided all financial investments and at the end of the contract gave up all operating rights to the state company, in return, the foreign company received a share of the production at a set price. (27)

Based on the new law, many foreign companies signed agreements with NIOC to develop Iranian oil fields. The first one under the buyback agreement came on stream in October 1998 and was the offshore Sirri, a field operated by TOTAL and Petronas of Malaysia. (28) In the following year, Iran signed contracts with France's Elf Aquitaine and Italy's ENI/Agip to implement an oil recovery program at the Doroud oil and natural gas field, Iran also agreed to allow Bow Valley Energy of Canada and TOTAL to develop the Balal field, an offshore oil field with 80 million barrels of reserves. (29) Although, NIOC's attempted to establish ties with U.S. investors, its attempt failed in 1995 when the American president Bill Clinton imposed sanctions against Iran.

Moreover, Rafsanjani indicated that he would pursue diversification of Iran's oil-reliant economy. However, he did not make significant progress towards that goal. Also during his presidency, politically"... NIOC had to answer to numerous authorities." (30)

Finally, high inflation and some expansive programs, as well as powerful economic-political vested interests created obstacles for the reform followed by the Rafsanjani's government. (31) As a result, Mohammad Khatami as the next president committed himself to continued reform and Rafsanjani's policy in the oil sector.

Khatami's government insisted on stabilizing the economy. Keeping this belief, he established a five-year economic plan in 2000 aimed to privatize many of Iran's major industries, including parts of the oil and natural gas markets. Despite its worn, out-of-date oil industry, NIOC moved ahead with goals to increase foreign investment and oil output. Increased earnings meant that NIOC might be able to modernize its oil industry and invest in improved technology.

However, the outcome of this policy was the association of the Oil Ministry with one hundred affiliated and subsidiary companies. All the oil and gas projects were divided between these companies. For instance previously, all the explorations, drilling and production efforts were concentrated under one director in the NIOC, but from that time there were ten to twelve companies each making decisions and having a finger in the pie. Meanwhile,"... with increasing Oil Ministry power, the number of employees also has increased. Before the revolution, Iran had total 54,000 employees working for the Iranian oil industry. In 2007 this number has reached the colossal figure of over 180,000." (32)

The change on energy policy has led the NIOC to plan for boosting oil production to seven million barrels per day by 2015. (33) To accomplish this policy, the government needed foreign investments of around $5 billion annually. (34) Based on this requirement During Khatami's period, Oil Ministry followed signing agreements with foreign oil companies. In October 1999, iran made what it believed to be its largest oil discovery in 30 years: an onshore field known as Azadegan, located near the Iraqi borders in the southwestern province of Khuzestan. Estimated to hold in-place oil reserves of 26 to 70 billion barrels, Azadegan had the potential to produce some 300,000 to 400,000 barrels per day over 20 years. (35) On November 1,2000, Japan earned exclusive negotiating rights to develop Azadegan in exchange for a $3 billion loan to Iran. Japan negotiated the agreement for a consortium of Japanese firms that included Japex, Inpex, and Japan National Oil Corp. (36)

Some criticism started coming from the faction opposed to Khatami's government. Khatami faced fierce opposition from his powerful opponents within the unelected official bodies of the state which he had no legal power over, and this led to repeated clashes between his government and these official bodies. For instance, the Guardian Council blocked several proposals for privatization and launched an independent probe of irregularities in NIOC and oil Ministries. (37) At the same time, the increased power of the supreme leader changed the domestic and foreign policies of Iran from moderate and reform to radicalism resulting in Ahmadinejad becoming president.

Ahamdinejad, as president, started to criticize management of oil sector. His government has been following "total change" in the structure of the oil sector and "fundamental" changes in contracts. They also criticized the "buyback" system under which Iran gives payment to oil companies that develop its oilfields. (38)

However, Ahmadinejad sought greater control over the oil sector and established the Petroleum Council to supervise the awarding of oil contracts. But Ahamdinejad's policy came under criticism by researchers. They believe that his policy has increased Iran's economy dependence on oil revenue. Some of them argue that expanding government budget and increasing dependence on the oil revenues is a serious problem for the country. (39) It seems that, Ahamdinejad, at least was successful in decreasing the role of reformist groups in the oil industry which had increased during Rafsanjani and Khatami periods.


Socio-economic interest groups and organizations have major role in shaping and directing states behaviors and affecting decision makers in different times and cases. These groups want to get their business done.

The Iranian society has experienced some interest groups and organizations during the last three decades. "... The situation in Iran before and after the revolution has witnessed strong relations between the major socioeconomic interest groups and organizations- conservative clerics and bazaars--which would lead to the revolution and then to strong and powerful political and economic coalitions since the revolution." (40)

Bazaar, technocrats and reformist are some important groups that have played role in process of oil decision making policy. "... Bazaar religiously based traditionalists, better defined as "Hey'atis"--those who are bound by allegiance to a common cleric or mosque. Traditionalists do not only believe in Velayat-e-Faqih and supreme leader, but believe that the religious leader's authority transcends law and the will of the majority. (41) Some Hey'atis explicitly reject westernization and modernity and prefer Iran's isolation from the international community. Some others in contrast prefer Iran's integration into the international community and modernization. (42)

The second group including technocrats and reformists are Western-oriented. The technocrats in relations with other reformist groups have played strong role in shaping Iran's energy policy since the revolution. "... Some of the technocrats and reformists graduated from Western universities, have perspective that places Iran above Islam. Some are globalist in thinking and most are pragmatic in outlook. The technocrats are focused more on written laws, and view knowledge, science and education as the most important prerequisites of progress." (43)

During Rafsanjani's presidency, his support in oil sector came from Bazaar. However, some of Rafsanjani supporters had been known as technocrats in relation with other reformists followed the new policy in oil industry. Although, there was competition and differences between Bazzar and technocrats and reformist for more than 20 years, decision making policy in Iran's petroleum sector was controlled by these groups under the guidance of Rafsanjani and Khatami. Therefore, most decision makers were eager to see qualified Western firms channel both capital and technology into this sector. (44)

In 2004-2005 radical groups which almost did not have any role in oil decision making process took the power. Radical groups via Ahamdinejad's government lambasted the management of oil sector and claimed that Iranian oil wealth was controlled by a single powerful family (that means Rafsanjani Family). Ahmadinejad has remarked that "... the atmosphere ruling over our deals, production and exports is not clear. We should clarify it." (45)

It is clear that Ahmadinejad would not have made those comments without the backing of the supreme leader of whom he is a zealous follower, and who has the last word on the important issues. (46) As it can be seen during Ahamdinejad period, some institutes such as the Revolutionary Guard and the Dispossessed Foundation (Bonyad-e Mostazafan) have increased their roles in NIOC. Though, Bonyad-e Mostazafan has played a role in NIOC's marketing division throughout the 1980s, during Ahamdinejad presidency Iran's Oil Ministry signed an agreement with Bonyad-e Mostazafan for selling the oil in 2009.

It seems that radical groups have been successful to increase their role in Iran oil decision making policy during Ahamdinejad period. But there are still some official bodies which have power to play role in energy policy.


Parliament is another elected entity that has right to play role in energy decision making policy. Iran's parliament is a unicameral legislative body with 290 members elected by the public every four years. Each member of the parliament represents a geographic constituency. The Parliament is also responsible for impeaching Cabinet ministers and approving the country's budget. (47)

The role of watchdog over NIOC has largely fallen to the parliament, particularly to the Economics and Energy Committees. Parliament members have often politicized issues of oil management and use charges of corruption to block some of NIOC's objectives. (48) This is due to the fact that the parliament has the power to approve all international agreements, contracts, and treaties. Oil agreements and petroleum law approval are under the parliament responsibility. (49)

The parliament introduces and passes the laws which are ultimately checked and approved by the Guardian Council. But the Guardian Council, a highly influential twelve-member body of six clerics and six conservative jurists picked by the supreme leader, has veto power over all decisions made by the parliament. For instance, in 2001, a leading conservative ally of the supreme leader and former chairman of the Guardian Council Ayatollah Abroad Jannati accused the Oil Ministry of diverting millions in state funds to foreign bank accounts. (50)

Meanwhile, "... the Guardian Council "can interpret articles in whatever way they want," and are thus free to approve or reject almost any interpretation of constitutional law." (51) The power of the Guardian Council in rejecting parliament laws has brought conflict between them. Thus, in 1988, Ayatollah Khomeini created the Expediency Council, which has the authority to mediate disputes between the two bodies of the Council of Guardian and the parliament. The supreme leader appoints each member of the Expediency Council, which in turn serves as an advisory body to the supreme leader. The Council is presently headed by former president All Akbar Hashemi Rafsanjani, and the majority of its 34 members hail from the conservative groups.

The Expediency Council has responsibility to approve the main policies of the country. These policies have affected energy policy of the country. For instance, in 2002, Iran's Expediency Council approved the 20-Year Vision Plan to promote the position of the Islamic Republic of Iran in national, regional and international levels in which Iran becomes a developed country in twenty years, with the first economic, scientific and technical stand in the region. (52)

The Expediency Council also has a plan for privatization. Hashemi Rafsanjani, as head of this Council, believes that: "... There is a wide gap between the private sector and the government in this respect and we need to move towards real privatization and move towards free market economy in Iran." (53)

However, the power of the Expediency Council has been reduced due to the conflict between the supreme leader (Ayatollah Khamenei) and the head of the Council (Rafsanjani). This is the effect of Ayatollah Khamenei's policy which has tried to bring the rule under his control.


Domination of the supreme leader has increased and affected the decision making policy of the country. This domination is done through the government and the parliament which is controlled by conservatives since 2005. For instance, the Supreme leader's authority can be manifested through the implementation of some plans such as restructuring of the subsidy system mainly in energy field on which there wasn't any accordance.

The subsidy program, created after Iraq's invasion of Iran in 1980, sought to mollify a restive population and achieve "social justice". (54) However, as a result of continuing subsidy system during the past two decades, people became accustomed to consuming cheap goods particularly oil and gas products in a way unparalleled in the world. For instance, in 2009-2010, Iranians were paying as little as 38 cents for a gallon of rationed gasoline, cheaper than bottled water. Gas cost 10 cents per liter, while a liter of bottle water cost around 25 cents. (55) Therefore, value added in oil, gas and electricity generation accounted for almost 25 per cent of GDP in theses years. (56)

The Rafsanjani and Khatami administrations took considerable steps to end multibillion-dollar public subsidies, but their attempts even to reduce subsidies failed. (57) By 2010, the economy was reeling under high inflation and unemployment, but the subsidy reform plan was still implemented by the Ahmadinejad administration. (58)

While higher revenues resulting from the liberalization of energy was one of the reasons for applying the plan, a question can be raised. Why were the previous governments unable to enact the plan while Ahmadinejad could? To understand the reasons, it is important to examine the political obstacles that the governments of Rafsanjani and Khatami faced.

Leadership and Parliament: In the early 1990s, technocrats under Rafsanjani were arguing for a"rationalization" of subsidies particularly energy subsidies. Although Rafsanjani promised to enact the reform plan conservatives who controlled the Fourth Parliament stopped him fron achieving his goal. (59)

While privatization, subsidy reform, foreign investment, and welfare expansion were all considered as a part of the Khatami administration's economic plans between 1997 and 2005, the Seventh Parliament overruled the bill arguing that such a law would boost inflation and put more pressures on low-income social classes. The members of parliament approved another plan to fix price of goods and state services, which prevented the government from increasing price of some goods such as gas and gasoline. (60)

The important point is that Ayatollah Khamenei, as a supreme leader, did not support Rafsanjani and did not stop opposition to Khatami's plan in Seventh Parliament as well, while he pressured the members of parliament to approve the Ahmadinejad's bill which was almost based on Khatami's plan for the restructuring of the subsidy system. It has to be considered that during parliamentary discussion of the bill, the Parliament Research Center warned that removing price supports would quadruple the price of gasoline and could result in similar increases for basic goods, creating an inflation rate of 60 per cent and more. (61)

Therefore, the conservative parliament tried to delay the changes by challenging the government's authority to decide on how to distribute savings generated from the subsidy cuts among the poor. In addition, Ahmadinejad demanded a broader bill to remove $40 billion in subsidies, but the Parliament speaker, Ali Larijani, a pragmatic conservative and rival to Ahmadinejad, called for the smaller, $20 billion subsidy Cut. (62)

However, the premonition of Ayatollah Khamenei was enough to change parliament decision, when he declared: "I hope that between the parliament and the administration a desirable conclusion is reached on the implementation of the subsidy reform bill." (63) After Ayatollah Khamenei's statement of support, Larijani appeared to change his tone, saying "lawmakers would do their utmost to cooperate with the president." (64) Moreover, following the approval of the plan by the parliament, the Guardian Council on January 13, 2010 approved Ahmadinejad's plan intended to allow the prices of now-subsidized goods to reach normal market prices over the course of the next three to four years.

Thus, according to the plan, the price of subsidized gasoline jumped to about $1.44 a gallon from about 38 cents a gallon. In addition, Gasoline bought over and above the monthly ration will increase to about $2.64 a gallon. (65)

Influence of the Leadership via Interest Groups: The other reason behind the accomplishment of Ahmadinejad's plan was the alignment of some groups such as the Islamic Revolutionary Guards as a foundation under control of the leader with the government. As it has been mentioned earlier, the Islamic Revolutionary Guards are Iran's most powerful security and military actor, it also controls much of Iran's economy through leadership or outright ownership of many industries.

The Islamic Revolutionary Guards has expanded its influence in the oil and gas sector since Ahamdinejad became President of Iran in 2005. This has occurred through the process of privatization of oil industry which was an opportunity for the Islamic Revolutionary Guards to increase its business activities in the absence of foreign oil companies. (66)

It is important to know that, although the Guards have benefited from Iran's international isolation as the gatekeepers to an increasingly closed economy, according to the some scholars, "... the Guard's ability to profit from their economic role has been undermined by U.S. and international sanctions, which were designed in part to pressure the Guards on the nuclear program. Thus, subsidies reform could return the Guards to a more favorable economic position and help secure their nuclear prerogatives". (67)

Therefore, Ahmadinejad's plan has been supported by the Islamic Revolutionary Guards. This illustrated how the Islamic Revolutionary Guards, provided security for the restructuring of the subsidy system by the Ahmadinejad administration, while Rafsanjani's government was criticized by the newspapers and media even when it tried to remove subsides of bread. Because of that, for cutting energy subsidies which had effect on all goods, Rafsanjani had to reverse his efforts for fear of unrest. (68) Even Mohammad Khatami, who advocated the need for economic, political and social reforms, and won his victory with 69 per cent of the vote which was seen as an indication of a widespread popular desire for political and economical change, faced the fear of mass protests against ramifications of the scheme. (69)

Thus, this support limited to opposition from the newspapers and most of the scholars, and any protests which might come against the plan. As a result, Ahmadinejad's government, with the help of the Guards, enacted the plan which none of the previous governments could do, and since 2010 the Guards have been a major player in Iran's oil industry.

Thus, although restructuring the subsidy system hasn't given any economic results so far, it has proved that the leader could bring the rule under his control.


Iran's energy policy has changed and shifted from time to time as a result of coalition decision making structure which determined Iran's political system. The Iranian decision making body allows different political actors to participate in the decision making process. By distributing the political power among different political institutions, different actors within these bodies can push their agendas and implement them. Also, this type of decision structure has allowed some interest groups to intervene and participate in the oil decision making process.

Among the elected and non elected official bodies in the process of energy decision making, the role of the supreme leader is significant. By holding the highest position in the Iranian political structure, the supreme leader can draw and direct the general policy of the state which is subsequently implemented by the president and his cabinet members. Thus, the role of the supreme leader has to be considered as an important reason behind shaping energy policy of Iran.


(1.) ECO; Trade and development Bank 2009-2010, "Iran, Country Partnership Strategy." website: CSPReports/ReportsLibrary/IRAN.pdf.

(2.) .lames N Rosenau, "Pre-Theories and Theories and Foreign Policy," In Farrell, R. Barry (eds), Approaches to Comparative and International Politics, (United States: Northwestern University Press, 1966), p. 44.

(3.) Margaret G. Hermann, "How Decision Units Shape Foreign Policy: A theoretical Framework," In Hagan, Joe D. and Hermann, Margaret G. (eds). (2001, December I). Special Issue of International Studies Review: Leaders, Groups and Coalitions, Understanding the People and Processes in Foreign Policymaking, Vol. 3, pp. 47-81. (Blackwell Publishing Professional, 2001), pp. 58-61.

(4.) Ibid

(5.) Ibid.

(6.) BP Statistical Review of World Energy 2005, British Petroleum, website:

(7.) Ministry of Commerce, "The Foreign Trade Regime of the Islamic Republic of Iran," 2009.p: Irans-Foreign-Trade-Regime_Report.pdf.

(8.) Reference for Business, "National Iranian Oil Company," website: NATiONAL_IRANIAN-OIL_COMPANY.html.

(9.) Dan Brumberg and Ariel Ahram, "Market and Politics," (Georgetown University Prepared for the Baker Institute Energy Forum Rice University Houston, 2007),p:2. website: publications/docs/NOCs/Presentations/Hou-Brumberg-Iran.pdf.

(10.) Reza Bayegan, "Iran's New Oil Disorder- an Interview with Dr Parviz Mina," Ekbatan Observer. website: 2005/08/irans-new-oil-disorder-interview_with.html.

(11.) Narsi Ghorban, "The Need To Restructure Iran's Petroleum Industry (Revisited After Eight Years)," Middle East Economic Survey,(2005), Vol. XLVIII, No. 24.

(12.) Constitution of Iran article 110.

(13.) Ibid.

(14.) Dan Brumberg and Ariel Ahram, "Market and Politics," p.7.

(15.) Reference for Business, "National Iranian Oil Company."

(16.) M. Hashem Pesaran, "The Iranian Foreign Exchange Policy and the Black Market for Dollars," Middle East Journal, 1992, Vol. 24, No. I, pp. 101-125.

(17.) Ibid.

(18.) Bonyad-eMostazafan, "Bonyad-eMostazafan Islamic Republic of Iran." website:

(19.) Dan Brumberg and Ariel Ahram,"Market and Politics," p. 51.

(20.) Mehr News Agency 20 June 2007, "Iran lists 21 oil companies for privatization." tx_ttnews[pS]=l180648800&tx_ttnews[pL]=2591999&txttnews [arc]= 1 &tx_ttnews[tt_news]=219-&tx_ttnews[backPid]=237- &cHash=8aed060ba4.

(21.) Mehdi Khalaji, "Iranian President Ahmadinezhad's Relations with Supreme Leader Khamenei," The Washington Institute for Near East Policy. Website: &CID=2514-11k.

(22.) Ibid.

(23.) Constitution of Iran article 115.

(24.) Ramin Jahanbegloo, "Who is in Charge in Iran," Heartland Magazine, 2005.04.Unveiling. lran pp. 6-13. Website:

(25.) Mehdi Khalaji, "Iranian President Ahmadinezhad's Relations with Supreme Leader Khamenei."

(26.) Paola Ceragioli, and M. Martellini, "The geopolitics of pipelines," Asia Times, Middle_East/EE29Ak05.html.

(27.) Reference for Business, "National Iranian Oil Company."

(28.) Ibid.

(29.) Ibid.

(30.) Dan Brumberg and Ariel Ahram,"Market and Politics," p. 26.

(31.) CIA World Fact book 2008, "U.S. Dept. of State Country Background Notes." website: economy.asp?country ID=21&regionID=3.

(32.) Reza Bayegan, "Iran's New Oil Disorder- an Interview with Dr Parviz Mina."

(33.) Energy Information Administration, "Iran," Country Analysis Briefs United States. website:

(34.) Ibid.

(35.) Reference for Business, "National Iranian Oil Company."

(36.) Energy Information Administration, "Iran."

(37.) Dan Brumberg and Ariel Ahram, "Market and Politics," p. 29.

(38.) Reza Bayegan, "Iran's New Oil Disorder- an Interview with Dr Parviz Mina."

(39.) Masoud Nili, "Picture of Iran's Oil-Dependent Economy," Iranian International Magazine. website: http://www.iraninternationalmagazine.tom/ issue_40/text/picture%20of%20iran's%20oil.htm.

(40.) Ibrahim Mahmoud Yaseen Alnahas, Continuity and Change in the Revolutionary Iran Foreign Policy, (Department of Political Science Morgantown, 2007), p. 51.

(41.) Hooshang Amirahmadi, "Iran's Power Structure." website:

(42.) Ibid.

(43.) Ibid.

(44.) Hooshang Amirahmadi, "Iran's Power Structure."

(45.) Reza Bayegan,"Iran's New Oil Disorder-an Interview with Dr Parviz Mina."

(46.) Ibid.

(47.) Ramin Jahanbegloo, "Who is in Charge in Iran."

(48.) Dan Brumberg and Ariel Ahram, "Market and Politics," p. 26.

(49.) Constitution of Iran article 77.

(50.) Dan Brumberg and Ariel Ahram, "Market and Politics," p. 44.

(51.) Ibid., p. 29.

(52.) Mahmoud Vaezi, "Iran's Constructive Foreign Policy under the 20-Year Vision Plan," Center for Strategic Research. website:

(53.) Your Petrochemical News 25 Sep 2008, "Twenty petrochemical companies to be privatized in lran." website:

(54.) Alireza Nader, "Iran Overhauls Subsidies in the Face of Sanctions." website:

(55.) Semira N. Nikou, "Iran's Subsidies Conundrum," United States Institute of Peace. website: pb49_0.pdf.

(56.) Dominique Guillaume and Roman Zytek, "The Economics of Energy Price Reform in the Islamic Republic of Iran," International Monetary Fund, p. 2. Website: cr1076.pdf.

(57.) Khashayar Hooshiyar, "Iran, Globalization, and US imperialist agenda in the Middle East," Iran review, website:

(58.) Masoud Nilil, "Iran's Economy after Restructuring of the Subsidy System," Iran National Library Conference. website:

(59.) Ibrahim Mahmoud Yaseen Alnahas, Continuity and Change in the Revolutionary lran Foreign Policy, p. 131.

(60.) "High Oil Price Undermines Economy, an Interview with Kamal Daneshyar," Iran International Magazine. website: bttp://www.iran

(61.) Robert F. Worth, "Ayatollah Supports Bid to Sharply Cut Iran Subsidies," New York Times. website:

(62.) Ibid.

(63.) Ibid.

(64.) Ibid.

(65.) William Young, "Gas Prices Soar in Iran as Subsidy Is Reduced," New York Times. Website: middleeast/20iran.html?_r=1.

(66.) Ali Alfoneh, "How Intertwined Are the Revolutionary Guards in Iran's Economy?," American Enterprise Institute for Public Policy Research. Website:

(67.) Alireza Nader, "Iran Overhauls Subsidies in the Face of Sanctions."

(68.) Yahya Ale Eshagh, Mehr News Agency. Website: D=1232542.

(69.) All Asghar Kazemi, "Political Constraints of Iran's Economic Reform," Middle East Academic Forum, December 27, 2010.

By Mahnaz Zahirinejad *

* Dr. Mahnez Zahirinejad, who received a Ph.D. from the Center for West Asian Studies, School of International Studies, Jawaharlal Nehru University, is a commentator on Political Economy of Asian counhtries, Globalization, and Foreign Policy.
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Title Annotation:OTHER PAPERS
Author:Zahirinejad, Mahnaz
Publication:Journal of Third World Studies
Article Type:Essay
Geographic Code:7IRAN
Date:Mar 22, 2012
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