Mahmood Khagani attended the Flame conference as a representative of the Iranian Chamber of Commerce, and as a former Director General of Caspian Sea Oil and Gas Affairs at the Iran Ministry of Petroleum. In the wake of the Iran sanctions announcement, we caught up with him to discuss the impact on Western energy companies involved in the region, and the possibility of unlinking Iran’s oil and gas revenues from the dollar.
“We should define a new currency for energy trade. Perhaps it would be BTU, energy coin, gas coin – those are the sorts of ideas that we are discussing at the moment”
What are the implications of possible sanctions on the Iranian gas market?
Well, we had better say what are the implications for producers and consumers? If for example one major gas reserve holder like Iran is put under sanctions, I believe the consumers should also be a bit concerned and worried, because now they have to get what they need with a higher price with more difficulties.
This is consumers within Iran that you are talking about, or wider?
No, I am talking about global consumers. Particularly in Europe, as Flame is all about European gas. And in our view, we should really take steps not to politicise gas, and oil, and the energy industry in general. We should depoliticise it, and let the economy decide. And obviously energy is fuelling the vehicle of economic growth and creating jobs. And these kinds of attitudes, that we put pressure politically on major gas producers like Iran, in my opinion are a very wrong political decision.
Do you think you can ever make a gap between the market and politics? They are surely always going to be interlinked?
Well, regretfully at the moment this is the case. If you talk for example about the USA, you talk about the free market. You say there is no government control on businesses, but at the end you see that the government makes a decision, and businesses don’t know what to do. So therefore I think we are entering a new era, and businesses and people should really come to the sense and understanding that they need to limit the government’s power to influence their short, medium and long-term plans. Because imagine for example in the case of Iran right now. During the last two years a lot of companies from Europe came to Iran, started business, signed agreements and contracts. Now they want to deliver and implement those contracts, and then one man makes a decision and disrupts everything. This is not fair, and we need to put our minds together and find a solution to these sorts of attitudes.
You’re obviously here at Flame with your own particular agenda, and there will be people that you want to talk to, and people that you want to discuss this with, and no doubt give a certain amount of reassurance to people as well. Who are you having conversations with?
Well we had conversations with some Europeans interested to have business in Iran particularly…
New business?
No, they have existing business which they want to prevail, and they are thinking of new businesses to develop. The problem at the moment is US dollars, because all the payments are through dollars, and Iran’s revenue stream (which is oil and gas income) is in US dollars, and that is why the US has invaded Iran economically – using dollars as a weapon, the economy as a weapon – which is not fair. So what I am suggesting here is that we should define a new currency for energy trade. Perhaps it would be BTU, energy coin, gas coin – those are the sorts of ideas that we are discussing at the moment. But we have to get out of dollar domination for our industry to survive.
But do you think even if you got out of using dollars – dollars are just a unit of currency, and actually it’s got nothing to do with the unit of currency. This is between countries.
Well I think at the moment central banks are losing ground. As I said we are entering a new era, and you see now bitcoin is discussed, and similar ideas are going on everywhere. So if governments take current procedures and actions as their policies, like invading countries, dollar sanctions, or whatever, obviously other countries, other people, other governments, have to think of new ways to continue their trading with other nations. And I am of the opinion that the US is starting to lose ground on its dollar dominance.
Are you concerned that the people you are speaking to here today – you are here almost dare I say as damage limitation – you are here to present a reassuring face, and to ensure that business still comes your way, and to reassure those who have companies within Iran that you are still open for business and you still hope to be so. What is it that you can give, that you can say to reassure those who are looking at you and thinking if we continue business here then those sanctions will now apply to us as well.
The only short answer to this question is to take this nuclear agreement into consideration. Five plus one nations signed it with Iran, and all international organisations who are supervising it, they have said that Iran has accomplished its obligations and respected its signature on the agreement. So that goes as an example for all other types of agreements. So I am giving assurances to companies coming to Iran for business that we as an Islamic nation, which is a must according to Islamic teaching – you have to respect your agreements and contracts. And we did. Unfortunately one of the other members of the group who agreed with us walked away from its obligations. So I assure businesses who want to do business with Iran, especially in the energy industry, because the downstream sector in the energy industry in Iran has been now privatised, and upstream is still in the control of the Government, which production sharing for upstream is not that easy. But production sharing in the downstream sector of the energy industry is welcome, and is possible.
