Iran better to engage with West using structures consistent with its heritage, culture Caspian geography and anthropology
Iran better to engage with West using structures consistent with its heritage, culture
A British energy consultant warned that Western financial approach is either to attempt to gain ownership of Iran's sovereign resources or to place Iran into debt.
The internationally acknowledged energy consultant Chris Cook addresses in this exclusive interview to Mehr News Iran's future on attracting considerable foreign investment, economic prosperity during post-sanctions era and the country's withdrawal from economic stagnation occurred during sanctions.
Here is the full text of his answers to Mehr News' Lachin Rezaian:
Do you think the Joint Comprehensive Plan of Action (JCPOA) can enable Iran to attract considerable foreign investment and reanimate its dormant oil fields?
Definitely not in Dollars - in the absence of miracles - but possibly in Euros. At current market prices, I think that the development of new fields will not offer sufficient returns on investment to cover the perceived risks of the proposed Iran Petroleum Contract as I understand the IPC. However, reanimation of existing fields is possible on a case by case basis since the risks in respect of existing fields are much lower than for new production and therefore returns on investment demanded are lower, leaving more scope for agreement.
How can Iran take advantage of economic prosperity during post-sanctions era?
I think that there are difficulties with both the conflicting 'Reform' and 'Resistance' policy approaches as I understand them.
In relation to 'Reform' I think Iran should take great care in engaging with either Dollar-based or Euro-based markets and the financing and funding of inward investment based upon them. In my opinion Western market economies are unsustainably weak and fragile, and Iran would be unwise to allow claims over Iranian sovereign assets to support Western banking systems. In relation to 'Resistance', while this approach protects Iran from contamination during market/system breakdown, it does little to encourage or enable new investment in Iran using domestic resources . My colleagues and I advocate a 'Resilience Economy' approach whereby Iran may engage internationally and obtain financing and funding through the following mechanisms, where Iran in fact leads the way:
Energy Swaps - such as oil swaps (as with the Caspian Oil Swap); gas for power (as with Armenia); oil for products, and in particular technology for gas/power;
Prepay Energy Credits - a simple funding mechanism whereby international customers may simply pay forward for energy production.
How much it takes for Iran to recover from economic stagnation occurred during sanctions imposed by US and EU? What factors can accelerate Iran's economic restoration to happen ASAP?
I think that Iran's isolation from global markets represents a historic opportunity not to repeat the mistakes made by other global market economies in the last decade or so. In my view, the West is well aware of the sheer scale of the commercial opportunity Iran represents, but the Western financial approach is either to attempt to gain ownership of Iran's sovereign resources or to place Iran into debt. Iran has the opportunity to re-engage with the West financially as an equal, using the structures & instruments which are entirely consistent with Iran's heritage and culture.
Why do some foreign investors hesitate to enter the Iranian market, what are the potential risks to their involvement? Do you think the circumstances are conducive to foreign investment in Iran in a new era?
I have bad news and good news. The bad news is that Iran's legal and financial infrastructure is in need of a complete overhaul. Firstly, by way of example, there are some seven types of Company under Iran's Commercial Code and yet not one of them is suitable for either Consortium working, particularly across borders. Secondly, overseas investors are uncomfortable with the current means for commercial dispute resolution, and many observers consider that simple but effective means of dispute resolution such as mediation and arbitration are urgently necessary. But the good news is that the simple but effective risk and production sharing agreements and instruments outlined above may be introduced with minimal changes to Iranian law.
Chris Cook is a Senior Research Fellow at the Institute for Security and Resilience Studies at University College London. Chris was director at the International Petroleum Exchange IPE. IPE is known for trading Brent Crude until 2005. Chris Cook was originator of the Iranian oil bourse