Diplomacy & Crisis News

Photo By Abdolreza Mohseni

Iran will present its new oil contracts during a scheduled conference in February 2016 in Tehran. By 2020, the country hopes to increase crude production to about 6 million barrels per day (bpd), an increase compared to levels produced before the sanctions imposed by the West in response to its nuclear program.

But Tehran will probably need much more time to achieve this desired level of production. To develop new oil fields and ensure better infrastructure, Iran needs an additional $100 billion in financing from foreign investors. And while lifting sanctions will open up possibilities for external financing, the country also needs international oil companies to establish activities on Iranian soil. This could be a challenge, as binding regulations have historically made it difficult for energy companies to operate in Iran.

The lifting of sanctions brought the oil price down: Iran is the second largest producer, behind Saudi Arabia for conventional oil, and is fourth behind Venezuela, Saudi Arabia and Canada if we include unconventional crude. Beyond the impact of lifted sanctions, the slowdown in global growth, the strength of the U.S. shale industry and the global glut of oil supply (a surplus estimated at one million bpd) continue to fuel the downward spiral of the market.

Can a Public Private Partnership (PPP) provide the solution for the financing of energy infrastructure projects, at a time when Iran is facing declining revenues as a result of years of crippling sanctions? Iran’s new contract model is designed to gain the interest of international oil companies to participate in joint venture projects. Under the new Iranian Petroleum Contract, a foreign company would have several years to explore and develop deposits followed by 10 to 15 years of production rights. Meanwhile, the Iranian state oil company, The National Iranian Oil Co., would compensate the foreign company depending on the deposit, production volumes and oil prices.

Iran needs to consider a PPP and a legislative framework that would give more flexibility than the current contract in place.

Investments in the Energy Infrastructure

The introduction of a PPP in the new Iranian Petroleum Contract (IPC), would also allow the private sector to supply public services and infrastructure in the energy sector—both fundamental to the development and growth of Iran. The current oil price, which is at a record low, presents an excellent opportunity to create and maintain oil fields and, consequently, provides some scope for private and public sector. Crucially, it would allow the country to address its battered infrastructure, which have suffered from crippling sanctions and chronic underinvestment.

If companies are reviewing their budget in the development and exploitation of deposits, they have a chance to regain some of that capital through oil sales. If a project is technologically more difficult, it might gain higher income. So even if it requires more investment, it will yield greater returns. Investors will also be engaged in projects over a longer period, which should encourage greater production.

Management is key in the energy sector—partnering private and public actors will prove effective for improving service delivery. Reducing costs and time of executing projects is a priority in a very volatile market. The private sector has the ability to implement project within time and budget and eliminate cost overrun due to delays, a significant financial incentive.

The aim is not to prioritize the private sector but to balance risks in both sector associated with their own duties. This type of partnership mobilizes all the human and financial resources (public, private, international) and thus avoid costly disruptions in public investment programs, during periods of recession and budget cuts.

The PPPs are not a solution to a budget crisis led by its sanctions or simply low oil prices. But as a mean to optimize resources, PPPs are a contractual arrangement over the long term by which the public sector transfers to the private sector all or part of conception, financing, operation and maintenance responsibilities. Contrary to conventional wisdom, PPPs contracts enable government to determine the tariffs for users, standard levels to be achieved and met. The Iranian government will still be involved in the supervision of the PPP contract and ensure that public service objectives are met.

While Iran has huge economic and human resources, improving the economic situation will depend heavily on political reforms and major economic changes. The ideological nature of Iran’s system makes it difficult to bet on political and economic reforms capabilities.

A Competitive Edge for Iran?

Iran is at present estimated to hold about 157 billion barrels or 9.3% of world reserves. In comparison, Iraq has 150 billion and Saudi Arabia almost 266 billion barrels. Iranian production in late 2013 was 3.558 million bpd against 3.751 million bpd a year earlier, a 6% decrease relative to 2011. Iranian crude oil is light, with a low extraction cost. However Iranian deposits have low recovery rates (between 20 and 25%), which require investment and the injection of more gas into the wells.

 The new Iranian Petroleum Contract could potentially give an advantage to Iran over its competitors in terms of attracting new investments. If we look at it by sector, the most prominent one to benefit from such a partnership would clearly be Iran’s energy industry. The U.S. and other foreign investment in Iran’s energy sector should grow rapidly, allowing Iran to develop its production capacity and export oil, gas and petrochemicals.

Several international oil companies have already shown interest in the new contracts. Royal Dutch/Shell, Total and Eni were in Tehran during the last three months to discuss investment opportunities through the so-called ‘special conditions contracts’ to reserve ownership for exploration and development.

Immediately after the lifting of sanctions, European companies will probably be the first to invest. They have the most recent experience of doing business with Iran and will be less constrained by their own governments. It is common to see international players parterning with local businesses who have a good knowledge of the terrain.

Attracting Investors

Low oil price may have been the catalyst for the promulgation of PPPs. Iran’s new Petroleum Contract will be able to invite private companies and international investors to finance and operate energy assets at an attractive price. It will be interesting to watch the development of PPPs in Iran and evolution in the current volatile market as confidence will progressively build through an increase in the quality and quantity of projects coming in line.

To be viable in terms of attracting foreign investment, the new IPC should include four key things: appropriate risk allocation, a sound financial package, reliable concessionaire consortium and favorable investment environment. In order to do so, energy projects should be aligned with both public and private parties and ensure the appropriate management structures and procedure to obtain application of those four core aspects.

The success of the new Iranian Petroleum Contract model also depends on the specific fiscal terms of the agreement, which have not yet been finalized or announced. And even if Iran really managed to sign new contracts with foreign energy companies, these companies will still face major obstacles when it comes to actually investing, operating and advancing these contracts.

Iran can eventually return to production levels it had before the sanctions, but it will probably take much longer than the ‘immediate effect’ promised. Ultimately, fiscal terms that Iran will offer to foreign energy companies under its new contract model might be appealing enough to overcome the significant challenges that come with operating in the country.

In these partnerships, private companies can offer innovative design, project management skills and risk management expertise. A PPP IPC will require the private agent to take full responsibility for the performance of the asset over a long term, so that efficiencies arising from long term investment and asset management could be realized.

A diversified service can be adopted through these contractual relationships: concession contracts, lease-develop-operate, and build-operate-transfer among others. A collaboration between public and private sector for the purpose of delivering a project traditionally provided by the public sector.

The sole challenge will be to find the right balance between private sector capacity, government regulatory function and public satisfaction. Adding the political and social obstacles that will come through different phases of projects, the lack of legal framework and the rising of tariff to cover the costs of projects may face some important challenges. This new financing model will allow the presence of foreign investors in projects but in an operational and reasonable manner.

Only time will tell, but there are efforts being made to attract international investors in Iran. Future work is clearly needed before a PPP can be added to Iran’s economic model in a satisfactory manner. Partnership, if precisely planned and structured, can be a powerful tool not only to keep public company viable but also to address cost and investment challenges, improve efficiency and service quality, increase expertise, attract more rapid and substantial investments in infrastructure and new energy technologies.

The post A Public Private Partnership for Iran’s New Petroleum Contract? appeared first on Foreign Policy Blogs.

In the Horn, where cash-strapped regimes often teeter on the brink of financial survival and alliances are made and broken with bewildering regularity, the Gulf Cooperation Council (GCC) has found willing partners as Saudi-Iranian tensions escalate.

Le blog Reflets du Temps, qui consacre une large place aux questions internationales et des recensions de qualité, a publié le 23 janvier dernier un article mettant à l’honneur le numéro d’hiver (4/2015) de Politique étrangère.

« Particulièrement riche, ce numéro d’hiver de PE, puisqu’en plus du dossier Justice pénale internationale, étudié ici, un autre dossier alléchant : « Une ère nouvelle d’abondance pétrolière », et quelques forts articles-repères, tel celui sur les Primaires américaines ou celui sur le changement de position de l’Allemagne en termes de sécurité, permettent des lectures particulièrement enrichissantes.

Le bilan après 70 ans de Justice pénale internationale s’impose, tant dans les modes de fonctionnement, l’évaluation du rapport objectifs/résultats, les difficultés et insuffisances réelles, que dans les chemins d’améliorations possibles. 4 grands chapitres se partagent la tâche : « Entre âge de fer et âge d’or », « Le TIP pour l’ex-Yougoslavie », « Le TIP pour le Rwanda », « Le Droit à réparation ». Lectures foisonnantes et non moins passionnantes. […]

La faillite du TIPY, dont nous conservons tous en mémoire des débats, des images, a marqué durablement – hélas – nos imaginaires en termes de rêve abattu et de chute de l’idéal de primat universel du Droit. Jean Arnault Dérens décline avec la meilleure des pédagogies cette « aventure », née en 93, voulant « créer une juridiction neutre et impartiale, pouvant dire le Droit alors que la guerre se poursuivait encore », et mettant en cause, avec Milosevic, le Premier Président (Serbe, ici) en exercice de l’Histoire. Le tribunal de La Haye aura jugé 125 personnes, au cours de ses séances ; il y eut pas mal de procès avortés, de prévenus relaxés après appels, de décès, de suicides. Acquittement par exemple des chefs de l’unité Scorpions de la police, ayant mené le massacre de Srebrenica !!! Valse des procureurs ; lignes directrices hétérogènes, constantes pressions difficiles des grandes puissances et des leaders régionaux… S’il est bien un lieu où théorie de départ et état à l’arrivée divergent, c’est bien dans ce TIP ad hoc. D’autant que l’intégration dans l’Union Européenne des pays « neufs » de la zone fit l’objet de négociations aux allures de chantage, incluant le résultat des « passages » devant la Justice internationale. D’autant, encore, que le Kosovo, dernier théâtre de la guerre, échappe encore à l’heure qu’il est aux investigations poussées. […]

A lire, cette – encore cette fois – remarquable Revue, en ces temps que nous traversons. Car, ces références à un positionnement d’ensemble du Monde, dans le domaine de la Justice, font l’actualité, d’autant que la montée du Terrorisme, et les exactions par exemple en Syrie amènent de nouvelles demandes en termes de Justice Internationale. »

Pour lire l’article dans son intégralité, cliquez ici.

S’abonner à Politique étrangère.

El presidente tayiko, Emomali Rahmon, habla mucho de democracia, pero su presidencia se ha caracterizado por un estancamiento económico y social, agudizado por la corrupción y la mala gestión. El único partido de oposición con verdadero peso, el Partido del Renacimiento Islámico de Tayikistán (PRIT), ha sido prohibido y tachado de terrorista. Las elecciones fraudulentas y docenas de detenciones en 2015 han callado a los adversarios políticos, y en marzo asesinaron en Turquía a un líder de la oposición en el exilio. Los activistas temen el acoso de las autoridades, y las ONG “actúan en un entorno incierto y de alto riesgo”.

Suite à la parution de son numéro d’hiver 2015-2016, la revue Politique étrangère vous invite à la rencontre-débat organisée autour du thème : « La justice pénale internationale : un bilan ».

Avec Joël Hubrecht, responsable du programme « Justice pénale internationale et justice transitionnelle » à l’Institut des Hautes Études sur la Justice (IHEJ) et auteur, dans Politique étrangère, de l’article « La justice pénale internationale a 70 ans » ; et  Hélène Dumas, historienne spécialiste de l’histoire du génocide des Tutsi rwandais de 1994, et auteur, dans Politique étrangère, de l’article « Rwanda : comment juger un génocide ? ».

La rencontre sera animée par Marc Hecker, rédacteur en chef de la revue Politique étrangère.

Rendez-vous le jeudi 11 février à 18h à la librairie LDEL (362 ter, rue de Vaugirard, Paris 15e, métro Porte de Versailles).

L’entrée est libre et gratuite dans la limite des places disponibles.

Lord Mark Malloch-Brown, Crisis Group’s Co-Chair, joins Jonathan Prentice, Crisis Group’s London Office Director and Senior Advocacy Adviser, at an event in London’s Chatham House on 19 January 2016 to present the 10 Conflicts to Watch in 2016. In his speech, Lord Malloch-Brown addresses the changing nature of conflicts, increased multi-polarity of the international system and ongoing rise of non-state armed groups which will continue to affect the crises of today.

Las Naciones Unidas han celebrado su 70 aniversario y la cuestión esencial de la reforma del Consejo de Seguridad permanece abandonada, pese al número de iniciativas lanzadas, tanto por los think tanks como por otras instituciones, los Estados miembros y la secretaría de la organización. Y esto pese a que el Consejo de Seguridad y su reforma han sido objeto de un encendido, largo e infructuoso debate durante al menos 20 años. Con ocasión del 70 aniversario de la ONU y la reunión del G20 [Antalya, Turquía, 15-16 de noviembre de 2015] los esfuerzos por la reforma podrían haber ganado tracción, para asegurar que se escucha a un mayor número de voces, reflejo del mundo actual.

The personal relationship between John Kerry and Javad Zarif paved the way for a high-profile prisoner swap. But its biggest test is still to come.

In September 2002, Zeid was elected the first President of the Assembly of States Parties to the Rome Statute of the International Criminal Court. At that time, the Court was only a plan on paper, and over the next three years he oversaw the election of the first 18 judges, mediated selection of the Court’s first president, and led efforts to name the Court’s first prosecutor – laying out a functioning institution, despite considerable budgetary pressures and criticism of the Court from several leading nations.

Secretary-General Ban Ki-moon today called on the Government and all parties in Yemen as well as States in the region to commit to a comprehensive and permanent ceasefire to enable the rapid resumption of already delayed peace talks which the United Nations is facilitating.

Nearly a decade after the UN Human Rights Committee agreed that a Peruvian woman’s rights were violated for having been denied an abortion – and recommended that the Government compensate her – the UN human rights office announced today that Peru has said it will pay compensation for having refused her access to a legal medical procedure.

United Nations humanitarian agencies expressed concern today that an estimated 200,000 people are facing “sharply deteriorating conditions” in the besieged western side of Deir-Ez-Zor city in Syria, while the top UN relief official stressed that the world body continues to act “impartially, neutrally and independently” to reach people in need throughout the country.

Expressing concern over the impact on vital remittances from diaspora countries into Somalia caused by “necessary but less considered counter-terrorism regulations,” United Nations rights experts today warned the measures may “severely affect the human rights” of Somali people, while urging regulation-setting governments to guarantee the flow of such funds.

Strongly condemning the two stabbing attacks on two women, one of them fatal, in Israeli settlements in the occupied West Bank, a senior United Nations envoy on the Middle East today called upon Israeli and Palestinian authorities to ensure that the perpetrators are swiftly brought to justice.

I don’t understand the disproportionate focus on a half day in Benghazi vs. more than a decade in Iraq. When people say they just the facts, I think: We still don’t know when the decision was made to invade Iraq, or who was involved. We still don’t know why the intelligence was so warped. We ...

The United Nations in Libya has expressed regret over the decision of the country’s Presidency Council to postpone the formation of a national unity government for 48 hours beyond the deadline set by a UN-facilitated political agreement, emphasizing that all efforts to combat and eliminate these terrorist groups must be led by the Libyan State.

  By David Crist Best Defense guest columnist The importance of last week’s event in the Persian Gulf goes beyond current political sound bites. It speaks to the complex relationship between the two nations where engagement and confrontation co-exist. It shows the importance for the United States of having diplomatic relations with a still hostile ...

25 years after Desert Storm, America still hasn’t learned why it’s so difficult to win wars overseas.

International tourism grew by 4.4 per cent last year to a record 1.184 billion as calculated by overnight visitors to international destinations, 50 million more than in 2014, and the sixth consecutive year of above-average growth, UN World Tourism Organization (UNWTO) reported today.