International sanctions help Iran’s armed forces conquer the oil industry

As sanctions against the Islamic Republic of Iran intensify, domestic companies are increasingly taking on the responsibility to develop and manage Iran’s vast oil and natural gas resources. But these are not just any companies: They are the associates of the Iranian military.

On Wednesday 23 May 2012 the oil ministry, led by Major General Rostam Ghasemi (the former commander of the Khatam al-Anbia Headquarters, the economic arm of the IRGC), signed a memorandum of cooperation with the Oppressed Basij Organization, headed by Basij commander Brigadier General Mohammad-Reza Naghdi. The memorandum of cooperation stipulates that Basij engineers, scholars, and specialists will work alongside the oil ministry to aid the indigenous development of the country’s oil and natural gas industry.

This comes one day after the oil ministry signed contracts giving two other military-linked entities the right to exploit three oil fields. The government granted Khatam al-Osia Headquarters the right to develop the Alpha and Tosan fields, which are believed to contain a combined total of 500 million barrels of crude oil, of which up to 120 million barrels is extractable. The fields are expected to eventually produce up to 30,000 b/d.

The Social Security Organization of the Armed Forces (known by its Farsi acronym SATA) was awarded the Band-e Karkhe field, which could produce up to 20,000 b/d once developed. The field had originally been contracted out to the Austrian firm OMV. While both entities are linked to the armed forces, Khatam al-Osia, which is believed to have participated in highway construction projects in the past, still remains somewhat shrouded in mystery.

Editor’s note: There has been at least one very important myth at the heart of the public campaign to convince the world to place economic sanctions on Iran. This myth claims that the stronger the sanctions, the more likely Iran is to make concessions on issues such as its controversial nuclear program. This is what International Relations scholar Johan Galtung calls the “naive theory of economic sanctions”. As Galtung pointed out as early as 1967, the assumption that stronger economic sanctions will equal a greater willingness to make concessions by the targeted state is not necessary true due to the principle of adaptation: States evolve to deal with the challenges that confront them. Moreover, as Risa Brooks has argued, a state’s ability to unevenly distribute the pain of sanctions means that they can lessen the pressure on themselves by putting it on their people.

This is precisely what is happening in Iran. While economic sanctions have wreaked havoc on the Iranian economy, as the above article shows they may have actually strengthened the hand of entities like the IRGC, which has benefitted enormously from the demise of the domestic private sector and departure of international firms. As with the Islamic Republic’s experience in the 1980s, isolation strengthened the regime and potentially radicalized it. The generation of current and former IRGC members coming to power in Iran is not afraid of economic isolation because this was the crucible in which they were forged. A completely isolated Iran, with little stake in the international economy or security regime is more, not less, likely to take actions which may go against the collective interests of the international community.