Mohammad Jafar Ghaem-Panah, the President’s Executive Deputy, said in an interview about selling oil under sanctions: “When we are sanctioned, it means we have to sell oil through smuggling channels, and we are forced to hand the oil over to traders or brokers to sell it; but it is not clear whether the oil will be sold or when the money will return.” He went on to say: “Under these high-risk circumstances, issues such as the timing of the sale, how the money is returned and ensuring the security of the cargo up to the point of loading all arise. These conditions can create opportunities for profiteering, although the government is seeking to remove the sanctions so that such profiteering will no longer exist.”
Although these remarks point to the real difficulties of selling oil under sanctions, they contain an important analytical flaw: sanctions can make oil sales difficult, but they cannot justify weak oversight, managerial negligence or possible misconduct within the network of intermediaries.
First, the use of the term “smuggling” warrants consideration. From the standpoint of national sovereignty and Iranian law, Iran’s oil is not smuggled goods; the restrictions have resulted from unilateral US sanctions. The use by a senior government official of the term “smuggling” to describe Iranian oil exports, particularly at a time when oil sales and the repatriation of foreign-exchange earnings are at the center of regulatory disputes, could inadvertently contribute to a narrative that calls the legitimacy of Iran’s oil exports into question.
But the main issue goes beyond terminology. Ghaem-Panah speaks of the necessity of using traders and brokers, while evidence of misconduct within part of the network of oil intermediaries has now moved beyond media speculation and entered regulatory and judicial proceedings. The head of the General Inspection Organization has stated that about $11bn in funds had been placed with intermediaries. Not all of this constituted misconduct, but about $1.6bn was allegedly misappropriated by certain individuals. Fifty-nine cases have also been opened, and a number of suspects have either been detained or left the country. In one case, an intermediary left the country after receiving $200mn.
Under these circumstances, the main question is not why sanctions forced Iran to use intermediaries; the question is who selected these intermediaries, what guarantees were obtained from them, which institution monitored their performance, and why, in some cases, the country’s funds were not returned.
The Supreme Audit Court’s involvement in the case of indebted oil intermediaries further underscores the importance of the issue. We are no longer dealing solely with the circumvention of sanctions; the issue now concerns financial governance, safeguarding public assets and the accountability of domestic institutions. The roles of the Ministry of Oil, its subsidiaries and the Central Bank of Iran in selecting, supervising and settling accounts with the intermediary network must be clearly established.
If misconduct, negligence, conflicts of interest or even possible collusion among certain traders, intermediaries and domestic officials or brokers exists in this process, it must be investigated independently of the sanctions issue. Sanctions may create the need to use intermediaries, but they do not create the need for weak oversight.
The government cannot, on the one hand, speak of the difficulties of selling oil under sanctions and, on the other, disregard its responsibility for oversight and financial mechanisms. If oil must be sold through intermediaries, the government is obligated to have a clear and assessable mechanism for selecting intermediaries, obtaining guarantees, monitoring cargoes, tracking funds, preventing conflicts of interest and ensuring the repatriation of foreign-exchange earnings.
Now that the General Inspection Organization and the Supreme Audit Court have become involved in the matter, the reasonable expectation is that the investigations will not be limited to identifying a few suspects. It must be established which managerial and oversight structures created the conditions for these violations and what responsibility the Ministry of Oil and the Central Bank of Iran bear in this regard.
Sanctions are a costly reality, and lifting them should be a government priority. But attributing managerial problems, weak oversight and possible violations to sanctions amounts to avoiding the real issue. Sanctions explain why selling oil is difficult; they do not explain why oversight should be difficult. The government must be accountable for any misconduct that has occurred within the network for selling oil and repatriating oil revenues, and it must clearly distinguish between “managing sanctions” and “profiting from sanctions.”
NOURNEWS