VZCZCXRO0091
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHIT #0893/01 2750620
ZNY CCCCC ZZH
P 020620Z OCT 07 ZDK
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7565
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHDE/AMCONSUL DUBAI PRIORITY 0123

C O N F I D E N T I A L SECTION 01 OF 03 ISTANBUL 000893 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
LONDON FOR GAYLE, BERLIN FOR PAETZOLD, BAKU FOR HAUGEN, 
DUBAI FOR IRPO 
 
E.O. 12958: DECL: 09/25/2017 
TAGS: PREL ECON ENRG PGOV IR TU AZ
SUBJECT: AN IRANIAN OIL EXECUTIVE ON ISA'S "UNINTENDED 
CONSEQUENCES" 
 
ISTANBUL 00000893  001.4 OF 003 
 
 
Classified By: Sandra Oudkirk, Deputy Principal Officer; U.S. Consulate 
 General Istanbul. REASON: 1.4 (d) 
 
¶1.  (C/NF) Summary:  On September 26, Consulate Istanbul 
&Iran watcher8 met with Assadollah Maleknejad, Vice 
President of Iran,s Pars Oil company, to discuss regional 
and Iranian hydrocarbon issues.  Maleknejad politely 
criticized USG energy policy in the region, arguing that the 
Trans-Caspian pipeline is a pipedream, that the USG goal of 
cutting Iran out as a source of gas for Europe was playing 
into Russian hands, and that the best thing Washington could 
do to alter Iranian regime policies would be to allow 
unfettered U.S. investment in Iran.  Poloff shared an 
academic study concluding that Iran is undercutting its own 
energy (hydrocarbon) independence in its pursuit of a nuclear 
fuel-cycle; Maleknejad promised to share his reaction to the 
article on his next visit to Istanbul.   End summary. 
 
¶2.  (C/NF)  On September 26, Consulate Istanbul,s &Iran 
watcher8 met with Assadollah Maleknejad, Vice President for 
Finance and Economic Affairs for the Pars Oil Company in 
Iran.  Maleknejad was visiting Istanbul to apply for a U.S. 
visa to participate in a November 13 panel discussion at 
Columbia University regarding the future prospects for the 
Iran-Pakistan &peace8 pipeline.  (Maleknejad received 
preliminary approval for the visa and intends to return to 
Istanbul to pick it up if/when Washington authorizes 
issuance.) 
 
Pars Oil 
-------- 
 
¶3.  (C/NF) Maleknejad told poloff that after a 40-year career 
in the hydrocarbon industry, mostly with Iran,s national oil 
company (NIOC), including as Vice President for Gas Marketing 
and Export, he retired in 2005.  Finding retirement too slow, 
he jumped at an offer to return to the energy sector, taking 
up his current position at Pars Oil.  Maleknejad described 
Pars Oil company (not to be confused with &Pars Oil and Gas 
Company8, which manages aspects of the South Pars field) as 
a private company specializing in selling petroleum 
by-products, such as industrial oils and lubricants, 
domestically and internationally.  Pars Oil,s website 
indicates 75% Iranian government and institutional ownership 
and 25% foreign commercial ownership, including a 6.25% stake 
by Shell Overseas Holding Ltd and a 6.23% stake by Shell 
Finance Ltd. 
 
The &unintended consequences8 of ISA and the TCP 
--------------------------------------------- ----------------- 
 
¶4.  (C/NF) Maleknejad offered poloff a cicuitous 45-minute 
explanation of the recent histry of energy competition in 
the Black Sea and Capian Sea regions among the &key 
players8 (Iran, ussia, Iraq, Turkmenistan, Azerbaijan), the 
&key ransiters8 (Russia, Azerbaijan, Turkey) and the &ky 
consumers8 (Europe, the U.S., China, and Russi).  He 
asserted that &the Trans-Caspian pipelinethat you favor" -- 
i.e., to transport Turkmen ga to Europe via a non-Russian 
route -- "is almost ertain to fall victim8 to Turkmen, 
Azeri, and Tukish political, economic, and regulatory 
&ineffiiencies8, and may take a decade or more to be 
relized, &if ever.8  Moreover, Maleknejad added, &if 
Washington's goal is to prevent any Iranian involvement in 
the export of gas to Europe, this will e impossible.8 
Maleknejad claimed that even Azeraijan,s vast Shah Deniz 
gas field, which transpots gas to Turkey through Georgia via 
the South Cucuses Pipeline, has a 10% Iranian stake.  (Note: 
 "Neftiran Intertrade Company", aka NICO, a marketing subsidy 
of the National Iranian Oil Company, is a ten percent partner 
in the Shah Deniz Consortium.) 
 
¶5.  (C/NF) Maleknejad cautioned that the USG's &Iran 
Sanctions Act8, and the USG's insistence on pressing 
countries in the region to pursue the Trans-Caspian Pipeline 
rather than &more logical and profitable sources and 
routes8 (including Iran), is having very negative, 
unintended, &anti-free-market8 consequences.  These 
consequences, according to Maleknejad, include harming U.S. 
oil companies, harming the economic potential of U.S. allies 
(Turkey, Azerbaijan) to benefit from profiting off of Iran's 
gas and oil resources, blocking Iran's hydrocarbon sector 
from playing a &potentially helpful pro-capitalistic8 role 
in internal policymaking, and allowing Russia to become the 
dominant player on regional energy issues.  Poloff explained 
that the purpose of ISA was to pressure the Iranian regime to 
comply with international nuclear nonproliferation 
 
ISTANBUL 00000893  002.4 OF 003 
 
 
obligations and moderate its other destabilizing policies. 
Maleknejad replied that if the USG really wants to use energy 
policy to modify GOI behavior, Washington should allow U.S. 
companies unrestricted access to Iran's energy sector, &and 
see how quickly official Iranian policies change, to embrace 
American investment.8  (Comment:  Coming from a private oil 
company executive, such advice may have at least some 
underpinning of personal financial interest.  Moreover, this 
advice appears belied by the difficulties other western 
companies, such as Total and StatOil, are currently facing as 
they navigate Iran's complicated investment rules.  Recently, 
Statoil told Ankara econoffs that they had to write off USD 
three billion last year from their Iran investments.  End 
comment.) 
 
The Economics of Energy Independence for Iran 
--------------------------------------------- 
 
¶6. (C/NF) During a brief foray into the issue of Iran's 
refinery capacity,  Maleknejad confirmed that Iran imports 
some 40% of its gasoline needs because of limited refinery 
capacity and low gasoline yield at its existing refineries, 
and suggested that the investment required to make Iran 
self-sufficient in terms of gasoline production would be 
prohibitively costly.  Poloff took the opportunity to give 
Maleknejad a copy of an academic paper published in the March 
2007 &Nonproliferation Review8 titled &The Economics of 
Energy Independence for Iran8 (kudos to ISN/RA for 
supporting its publication and circulating it widely).  The 
paper concludes that the Iranian government's claim that it 
is pursuing &energy independence8 through its nuclear 
program makes no sense from an economic or resource 
perspective, and that if the Iranian government abandoned its 
nuclear fuel cycle pursuits and devoted the freed-up 
resources to its hydrocarbon sector it could achieve real 
energy independence. A highly curious Maleknejad promised to 
read the paper and share his reaction when he next comes 
through Istanbul. 
 
Too bad about Khatami 
--------------------- 
 
¶7. (C/NF)  Though underscoring early in the meeting that he 
preferred not to talk politics, Maleknejad warmed up to the 
topic when poloff queried which current Iranian political 
leaders held the most sensible economic views.  Maleknejad 
said that Iran's oil and gas sector was full of &very smart, 
well-trained, well-informed8 economists, hinting that he and 
his economically-oriented colleagues were unhappy with the 
current regime's regressively statist approach to managing 
the economy.  He noted that former President Rafsanjani has a 
reputation for enacting relatively pragmatic economic 
policies during his time in office, but also confirmed  -- 
from personal experience having worked briefly with one of 
Rafsanjani,s sons -- the reputation that the Rafsanjani 
family enjoys in Iran as being &unrivaled at corruption8. 
 
¶8.  (C/NF) Popular anger over rampant corruption, he 
speculated, was the primary reason Ahmadinejad was elected 
president.  Although some official corruption is now targeted 
more than ever before, Maleknejad posited carefully that of 
the many tradeoffs to electing Ahmadinejad is that Iranian 
economic policy is managed without much regard for basic 
economic principles.  He added, unsolicited, that &if only 
President Khatami had been given more support, domestically 
and internationally, I believe he would have taken the best 
economic approach of any Iranian leader.8  Asked if Khatami 
retained much popular support, Maleknejad surmised that he 
does (&along with some popular disappointment8), and that 
in the unlikely event that he is allowed to run for President 
in 2009 (i.e., not blocked by the Supreme Leader or 
disqualified by the Council of Guardians), he would likely 
win. 
 
Comment 
------- 
 
¶9.  (C/NF) Maleknejad was unfailingly polite in his meeting; 
even when criticizing USG energy policy he did so graciously. 
 His English, which he says he learned it as a student in the 
1960s taking English classes a &US-Middle East Friendship 
Association8 across from the U.S. Embassy, is excellent. 
His views struck poloff as largely non-ideological, 
pro-business, carefully non-political (except when 
criticizing ISA), and subtly encouraging of closer ) much 
closer ) U.S.-Iranian economic and commercial ties, despite 
what he recognized was the current impossibility of such 
 
ISTANBUL 00000893  003.4 OF 003 
 
 
links.  Poloff will seek a follow-up discussion if/when 
Maleknejad returns to Istanbul to pick up his U.S. visa. 
WIENER