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International business looks forward calm in Iran

Oil&Gas Materials 18 June 2009 10:34 (UTC +04:00)
International business looks forward calm in Iran

Azerbaijan, Baku, June 17 / Trend , A. Badalova/

Unstable post-election situation in Iran will not have a strong impact on flow of foreign investments in country's economy, specifically on oil and gas sector.

"In the short term current political instability is not likely to have a significant impact on foreign investment in Tehran's energy sector," Director of Middle East Studies Center at Pennsylvania University Gawdat Bahgat told Trend .

Protest demonstrations began in Tehran following publication of election results. Thousands of opposition supporters, unhappy with results of the vote, went out to streets. There was a clash between demonstrators and law enforcement agencies.

Mahmoud Ahmadinejad won 62.63 percent of votes as a result of presidential vote on June 12. "Liberal" candidate and former prime minister Mir Hossein Mousavi won 33.75 percent of votes.

Mousavi said he has won elections before the official results were released. But later he accused authorities of falsifying election results.

The ongoing unrest killed 7 Mousavi supporters.

The European Union also expressed concerns about the ongoing unrest in Iran. Earlier this week French Foreign Minister Bernard Kouchner appealed to EU foreign ministers to conduct an investigation into possible irregularities in the presidential elections in Iran. In response, Iran accused Paris with interfering with country's electoral process.

Bahgat said if this uncertainty about the country's future persists international companies are likely to be more hesitant to invest in Iran.

Iran holds the second largest world's oil proven reserves (after Saudi Arabia) and the second largest world's natural gas reserves (after Russia). Despite these massive reserves, Iran's current production does not match its potential.

Bahgat said despite American and European sanctions, the Islamic Republic has succeeded in signing major oil and gas deals with Russia, China and other Asian companies (as well as with a few European companies). Shell and Repsol look forward for improved investment climate in the country to get involved with development of South Pars field.

Bahgat said if the moderate candidate Mir Hussein Mussavi somehow succeeds and becomes president, the Islamic Republic is more likely to attract foreign investment than President Ahmadinejad.

U.S. Energy Security Analysis (ESAI) expert Andrew Reed says results of presidential elections will not have considerable direct impact on country's foreign policy.

"The outcome does not fundamentally change the nuclear standoff between the Islamic Republic and the West," Reed wrote to Trend via email.

It's doubtful that the protesters will dislodge Iran's clerical regime. Though Ahmadinejad's reelection will complicate American diplomacy the challenges before the administration are the same now as they were before the Iranian elections. Now as always progress in bilateral ties or the nuclear policy means inducing a change of heart in Ayatollah Khamenei.

Research fellow and expert on policy and management at the U.S. George Mason University Mark Katz said continued instability in Iran will have a negative impact on foreign
investment.

"At this point, though, it is not clear whether the current instability will continue, or whether the government will be able to halt it quickly," Katz said.

"Stabile policy is one of permanent terms to draw foreign investments in any country," professor of international relations at the University of Durham (Great Britain) Anoushirvan Ehteshami told Trend .

Presently, foreign companies wait for completion of events caused unstable situation in the country to make any decisions, he said.

"New agreements will be concluded with nations or companies irrespective of President Ahmadinejad's or Musavi's power sets in Iran, Ehteshami said. I think instability has temporary character. Foreign companies concerned in investments to Iran's oil and gas sector wait for completion of disorders in the country."  

If these events continue this way in Iran, investors are likely to increase insurance risks. But it will not happen soon, Ehteshami said.  

The last political events in Iran will create difficulties for European companies to invest the country's economy, Russian daily Kommersant editor-in-chief Azer Mursaliyev said.

"Iran's involvement in gas and oil supply of Europe has been discussed recently. Participation of the country as resources base for Nabucco gas pipeline was considered. Disorders in the country are sure to create difficulties for European countries," Mursaliyev told Trend over telephone. 

Political shock in the country is unlikely to scare such investors as China, Mursaliyev said.

E. Tariverdiyeva and T. Jafarov contributed to the article.

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