Iran State Energy Firms Crippled by Monthly Cash Payouts –Oil Minister

Iran's state oil refining and gas companies cannot afford the multi-billion dollar monthly cash payments to households demanded of them as part of government subsidy “reforms” pushed by Ahmadinejad, the Iranian oil minister said today.

In late 2010, Ahmadinejad administration began slashing subsidies on a range of fuels in order to reduce demand and costly fuel imports. But to soften the blow of higher consumer energy prices, the government set up a system of cash payments to households, which amounted to billions of dollars each month. That cash payment, which comes out of the oil ministry budget, is what the oil minister was referring to. It is practically bankrupting state-owned refining and natural gas entities.

“It leaves us nothing to invest in vital projects,” Bijan Zanganeh, Iran’s oil minister, said today. (SHANA, 27 October)

Zanganeh, said the National Iranian Gas Company (NIGC) and National Iranian Oil Refining and Distribution Company (NIORDC) are required under the current annual budget to pay 270 trillion rials (about $9 billion in free market exchange rate, or $23 billion in official rate) in cash to Iranian citizens as compensation for higher fuel bills.

“We have to sell crude oil in order to be able to deposit the necessary resources into Treasury,” Zanganeh said. “But we cannot afford it,” he added. (SHANA, 27 October)

Zanganeh made the comments on the sidelines of a conference in Tehran, emphasizing that NIGC and NIORDC would spend all their revenues on the handouts and have nothing left to invest in projects.

Zanganeh said in early October the government was preparing another increase in energy prices to lighten the subsidy burden on the government.