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Financial Times: Ahmadi-Nejad seeks tighter grip on revenue

By Najmeh Bozorgmehr in Tehran
Published: November 2 2007 03:13 | Last updated: November 2 2007 03:13

Mahmoud Ahmadi-Nejad, Iran’s president, this week moved to consolidate further his government’s hold over the country’s main sources of revenue when he presented his nominees to take over as the oil and industries ministers to parliament.

The move follows a recent cabinet reshuffle and the appointment two months ago of a central bank governor seen as more sympathetic to the president’s economic policy. Analysts suggest that, if his ministerial choices are approved, this will increase his influence over the top three organisations that administer the country’s resources.

Parliament will vote in the middle of the month on whether to approve the new candidates, both of whom have served as acting ministers following the resignation of their predecessors over the summer.

Gholam-Hossein Nozari is thought likely to win his vote of confidence as oil minister but there are doubts about the proposed industry minister, Ali-Akbar Mehrabian, an ally of the president, who may be blocked for lack of experience.

The oil ministry generates the lion’s share of Iran’s revenues, providing about 60 per cent of the government’s budget and has been the focus of several power struggles between the president and parliament.

The previous oil minister was imposed on the president after parliament rejected three of his nominees. Mr Nozari is believed to be less hostile to the government’s populist policies.

Analysts say he has been backed by one of the two main interest groups inside the oil ministry – the National Iranian South Oil Company (Nisoc) – which is the biggest subsidiary of the National Iranian Oil Company and deals with onshore projects in southern Iran.

Mr Nozari was head of the Nisoc’s intelligence department during the previous reformist administration and it was under his direction that Nisoc complained about an “oil mafia”, which it said awarded contracts to western oil companies, including Royal Dutch Shell, when it should have been giving them to local entities.

The oil ministry is projected to earn about $70bn (£34bn) by March 20 when this Iranian year ends – far beyond its budgetary needs. Many economists have blamed the government for failing to channel surplus oil revenues towards productive sectors, using them instead for day-to-day spending, which has led to record levels of liquidity.

The ministry of industries and mines oversees Iran’s biggest factories through two holding companies: the Industrial Renovation and Development Organisation, which handles car factories producing more than 1m cars annually, and the Iranian Mines and Mining Industries Renovation and Development Organisation.

The two ministries are set to carry out most of Iran’s privatisation programme, disposing of companies worth hundreds of billions of dollars. “Ahmadi-Nejad is trying to have as much control as possible on financial resources not to let them go to [critical] political groups in times of election,” said one economist.

Copyright The Financial Times Limited 2007

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