As the United States edges closer to issuing a fresh round of sanctions against Iran, foreign investors so far unmoved by international pressure will end up doing business with a Revolutionary Guard that makes even local firms nervous, an analyst warns.
The Islamic Revolutionary Guard Corps, known as the IRGC or Revolutionary Guard, is a military branch set up after the 1979 revolution to protect the regime and has become more ingrained in the Iranian economy particularly under President Mahmoud Ahmadinejad’s administration. In recent weeks, the Revolutionary Guard has declared that it can assume control of the energy industry if Westerners flee under the crush of coming U.S. sanctions. Over the last two-and-a-half decades, the powerful force has gradually moved into sectors like construction, energy and telecommunications, said Alex Vatanka, a scholar at the Washington-based Middle East Institute.
Given Iran’s oil and gas reserves and the country’s reliance on revenues from crude exports, “it’s very logical for the IRGC’s economic arm” to seek an even stronger footing in the energy sector as U.S. and United Nations financial penalties against firms operating in Iran pick up steam, Vatanka told OilPrice.com.
The IRGC has the “political muscle to push political contracts” through, but it is questionable whether the group is best-suited to coordinate these efforts on a domestic level, he said. “We know their intentions in the Iranian oil industry, and [local firms are] very often hesitant when they see IRGC involvement,” he noted.
Foreign companies would be “equally, if not more hesitant, to deal with the IRGC” because the organization is at the forefront of any U.S. government or U.N. attempt to apply new sanctions, he said. “So it really just raises the stakes for any foreign participant in these projects,” Vatanka said.
The overriding challenge is whether a firm, domestic or otherwise, can ever have a “fair struggle with the IRGC, if I can put it this way,” Vatanka explained. “They are politically so powerful that they can nullify, change terms and take the credit for anything that’s done positively and claim it to be their own. And if you stand up to them, they would basically label you against the Islamic Revolution.” He said questions also linger about the kind of revenue-sharing the Revolutionary Guard would offer international companies.
And whether the Revolutionary Guard can even fulfill Iran’s “very big intentions” in the gas sector remains to be seen,…
